abhishreshthaa
Abhijeet S
Traditional Classification of Ratios
Under this classification, the ratios readily suggest through their names, their respective sources. From this point of view, ratios are classified as follows: -
Balance Sheet Ratios or Financial Ratios:
They deal with the relationships between two items, or groups of items, which are together found in the balance sheet.
Example: Ratio of current assets and current liabilities, ratio of stock to working capital etc.
Revenue Statement Ratios or Income Statement Ratios
These ratios deal with the relationship between two items, or two groups of items, which are both found in the income statements.
Example: The ratio of net profit to sales, ratio of expenses to sales etc. These ratios are also known as Operating Ratios’ as they deal with the operating results of an organisation.
Inter-statement Ratios or Combined Ratios
These ratios indicate the relationship between two items or two groups of items, of which one is found in the balance Sheet and the other in the Income Statement (Profit and Loss Account).
Example: Stock Turnover Ratio, Return on Proprietors’ Funds, etc.
Under this classification, the ratios readily suggest through their names, their respective sources. From this point of view, ratios are classified as follows: -
Balance Sheet Ratios or Financial Ratios:
They deal with the relationships between two items, or groups of items, which are together found in the balance sheet.
Example: Ratio of current assets and current liabilities, ratio of stock to working capital etc.
Revenue Statement Ratios or Income Statement Ratios
These ratios deal with the relationship between two items, or two groups of items, which are both found in the income statements.
Example: The ratio of net profit to sales, ratio of expenses to sales etc. These ratios are also known as Operating Ratios’ as they deal with the operating results of an organisation.
Inter-statement Ratios or Combined Ratios
These ratios indicate the relationship between two items or two groups of items, of which one is found in the balance Sheet and the other in the Income Statement (Profit and Loss Account).
Example: Stock Turnover Ratio, Return on Proprietors’ Funds, etc.