What is the meaning of Ratio Analysis of a financial statement?
The term ratio means a simple division of one number by another. It is measured by the number of times one number is contained by the other, either integrally or in fraction. The ratio analysis of financial statement means the process of calculating structural relations of different items and groups in the financial statements. Generally,…
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Why Ratio Analysis of financial statements is important to bankers?
If any lending decision is to be properly made, the risk involved in the transaction should be properly evaluated. Risk evaluation primarily consists in the ascertainment of the ability of the prospective borrower to repay the proposed loan. To ascertain this ability, apart from financial analysis many other vital considerations such as the character of…
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Ratio analysis of Capital Structure/leverage ratios of a firm
(This article explains the method of computation and the purposes of capital structure ratios viz. Current ratio, Quick ratio/Acid test ratio, Debt Equity Ratio, Solvency Ratio, Proprietary or Equity asset ratio, Fixed assets to tangible net worth plus term debt, Current debt to tangible net worth ratio, Inventory to net working capital ratio, Current debt…
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What are other non-current asset items?
(This article identifies the non-current assets to be separated from current assets while appraising the working capital limits to borrower). Non-current assets are assets that a business holds for more than a year and are expected to generate economic benefits in the future. They are also known as long-term assets. Non-current asset examples · Land…
Read article What are turnover ratios?
Turnover ratios can refer to the percentage of a portfolio’s equities that are replenished in a fiscal period, or the time it takes a business to sell goods it has acquired. There are several types of turnover ratios, including. The turnover ratios or inter-statement ratios represent the quantity of any assets or liabilities used by…
What are profitability ratios?
Profitability ratios help a business entity as well as the lenders/investors to evaluate the ability to generate income as compared to its expenses and other cost associated with generation of income during a particular period. Profitability Ratios also help the managements in making business decision in respect of expansion or diversification of the business. As…
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