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 вЂratio' means reason. In English вЂratio' means marriage. Ratio analysis is defined as " the institution of a reasoned relationshipвЂќ of any fixed variable character between measurements of certain phenomenon having some sort of linkage. A ratio reveals the arithmetical relationship among two figures.
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
вЂў Current rate
вЂў liability ratio
вЂў sales rate
вЂў the liability ratio
2 TURNOVER RATIOS
вЂў inventory turnover proportion
вЂў receivable turnover ratio
вЂў turnover of capital investment
several DEBT PERCENTAGES
вЂў personal debt equity percentage
вЂў debts coverage proportion
4 PROFITABILITY RATIOS
вЂў gross earnings ratio
вЂў net earnings ratio
вЂў earnings every share percentage
вЂў fixed assets ratio
5 OPERATING RATIO
вЂў net revenue to fixed assets
вЂў net sales to inventory
вЂў net sales to net profit...