The profit-volume (P/V) ratio is a key metric for measuring a business’s profitability. It shows how a company’s profit changes in response to changes in sales volume. The P/V ratio is also known as the contribution ratio or marginal ratio. A company determines the selling price of its products after calculating of the fixed cost,…
The analysis of financial statements means identifying a business establishment’s financial strengths and weaknesses by interpreting and inferring the financial statements of the establishment. These statements cannot be analysed by the mechanical method as a financial statement is designed to give a fair, inaccurate view. Interpreting financial statements requires analysis and appraisal of the performance…
( This post explains, the difference between other current liabilities and the current liabilities for the purpose of working capital appraisal and items like contingent liabilities, netting of current liabilities and current assets.) The current liabilities are those dues, to be settled within 12 months from reporting date, including overdraft and loan installments payable within 12…
(This post explains important ratios are to be examined while appraising a term loan project. The articlealso deals with how to compute break even point, how to calculate DSCR (Debt service Coverage ratio) for the period of repayment of the loan, how to arrive fixed asset coverage ratio and important financial indicators. The assessment of…
The assessment Letter of Credit, Bank Guarantee (BG), or Letter of Guarantee (LG) limits are fixed by banks based on the annual consumption of raw materials to be purchased against the Letter of Credit or Letter of Guarantee (Bank Guarantee). Ascertain from the customer the requirement of Consumption of Material (CM) per annum, which is to be…
[This article elucidates methods and techniques used to analyze profit and loss statements, the Format of the operative statement, the meaning of gross profit, operating profit and net profit, depreciation, amortization, etc.] The profit and loss (P&L) statements are one of three financial statements that every public company issues quarterly and annually, along with the…
[The revised income tax return stipulates taxpayers to furnish details of time limit extended for tax saving investments/ donations made up to June 2020 separately.] The Central Board of Direct Taxes (CBDT) on May 30 notified revised Sahaj (ITR-1), Form ITR-2, Form ITR-3, Form Sugam (ITR-4), Form ITR-5, Form ITR-6, Form ITR-7 and Form ITR-V…
Credit management in simple words is the process of monitoring and collecting payments from the borrowers. A specialized credit management system eases the amount of capital tied up with debtors. The principles of credit management revolve mainly around the concepts of safety, Liquidity, Diversity, and Profitability. The banks all over the world examine following details…
The volatility ratio (VR) is a statistical metric that measures the price changes of a security or market index over a period of time. It’s a technical analysis tool that helps investors and traders. In banking parlance, volatile liabilities are ‘hot’ or ‘unstable’ funds that can disappear from bank’s balance sheet overnight. Demand deposits are…
[The working capital requirement of industrial and trading establishments means the sum of the funds invested by them in various current assets (like raw material (RM), work in process (WIP), finished goods (FG), and the outstanding receivables on goods sold. The working capital facility is extended to a borrower by the banks will depend upon on…