Different Users and Use of Ratios explained
Introduction Ratios are essential tools for assessing the earning capacity, financial soundness, and operational efficiency of a business organization. Accounting ratios, a group of metrics derived from financial statements, are widely used to measure management’s aptitude, efficiency, and profitability. By expressing relationships between various accounting data points, these ratios form the basis of ratio analysis.…
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Meaning of Accounting Ratios and Their Purposes
Accounting ratios are metrics used to compare two or more financial data points from a company’s financial statements to measure its profitability, efficiency, and overall financial health. These ratios are typically expressed in various forms, such as proportions, fractions, percentages, or terms of the number of times one value relates to another. Equation for Ratios:…
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What are working capital sources and working capital management?
Working capital is the operating capital of a business which is used in its day-to-day operations, calculated as the current assets minus the current liabilities. The positive working capital commonly indicates that a company can pay off its short-term liabilities almost immediately. Sources of working capital are Share Capital, retained profits, debentures, long-term loans, and…
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Emerging Role of the Financial Manager in India
A financial manager plays a pivotal role in overseeing the financial health of an organization. Their responsibilities encompass a wide array of tasks aimed at ensuring the efficient utilization of funds while maintaining long-term financial stability. This article explores the key roles and responsibilities of financial managers in India. Key Responsibilities of a Financial Manager…
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The difference between Reserves and Provisions explained
Both reserves and provisions refer to the amount retained by an organization to deal with all possible contingencies in the future. In accounting parlance, reserves are appropriations out of profits and provisions are charges against profits. Although the IFRS Standards sometimes call provisions a ‘reserve’, they are not the same thing – a provision is…
What is a common size balance sheet?
A common size financial statement is an income statement or balance sheet in which all items are expressed as percentages of a common base figure rather than as absolute numerical figures. For example, in a common-size income statement you will find the income and expenditure amounts as percentage of net sales. Similarly, a common size…
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