26.08.2019
 Essay on Ratio Analysis

RATIO EXAMINATION

Ratio examination is a crucial dimension of financial management, recommending a romantic relationship between earnings and loss as mentioned inside the balance sheet of the organization.

In Latin ‘ratio' means reason. In English ‘ratio' means marriage. Ratio analysis is defined as " the institution of a reasoned relationship” of any fixed variable character between measurements of certain phenomenon having some sort of linkage. A ratio reveals the arithmetical relationship among two figures.

ADVANTAGES

1 . Proportion analysis will help decision producers to take suitable decisions. 2 . The Proportion analysis entails the study of the overall financial picture of a concern/project. 3. The most fruitful area for use of economic ratio is definitely predicting company/project failures. four. Ratios enable the company's supervision to analyze organization situation also to monitor their performance. five. It helps the management to diagnose the situations screen the functionality and chalk out foreseeable future plans from the concern. 6. Certain proportions help the marketing manager, obtain manager and the financial administrator to know the actual positions are just like and how to find a way out in typical situations.

CATEGORY OF PERCENTAGES

Financial ratio analysis helps you to describe the numerous relationship between two equivalent figures economic statement.

TYPES OF RATIOS

1 . FLUIDITY RATIOS

• Current rate

• liability ratio

• sales rate

• the liability ratio

2 TURNOVER RATIOS

• inventory turnover proportion

• receivable turnover ratio

• turnover of capital investment

several DEBT PERCENTAGES

• personal debt equity percentage

• debts coverage proportion

4 PROFITABILITY RATIOS

• gross earnings ratio

• net earnings ratio

• earnings every share percentage

• fixed assets ratio

5 OPERATING RATIO

• net revenue to fixed assets

• net sales to inventory

• net sales to net profit...