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  • Ratios 1

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    How can we make sense out of ratio analysis? What are the groups of ratios? How can we use this to evaluate profitability, risk, and growth? a basis for evaluating suppliers and customers Useful in historical analysis as well as projecting performance End Users of Ratios Lenders - judge a company's ability to repay loans Managers - look at gross margins to keep costs under control Investors can compare their company against the competition and the rest of the industry.

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    How can we make sense out of ratio analysis? What are the groups of ratios? How can we use this to evaluate profitability, risk, and growth? a basis for evaluating suppliers and customers Useful in historical analysis as well as projecting performance End Users of Ratios Lenders - judge a company's ability to repay loans Managers - look at gross margins to keep costs under control Investors can compare their company against the competition and the rest of the industry.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    21 Ansichten12 Seiten

    Ratios 1

    Hochgeladen von

    tsrivilas
    How can we make sense out of ratio analysis? What are the groups of ratios? How can we use this to evaluate profitability, risk, and growth? a basis for evaluating suppliers and customers Useful in historical analysis as well as projecting performance End Users of Ratios Lenders - judge a company's ability to repay loans Managers - look at gross margins to keep costs under control Investors can compare their company against the competition and the rest of the industry.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    von 12

    Accounting

    Rajveer Rawlin
    Senior Lecturer, Finance,
    MBA (VTU)
    Dayananda Sagar Institute
    Ratio Analysis
     Why look at ratio analysis?
     How can we make sense out of
    ratios?
     What are the groups of ratios?

     What are the limitations of ratio


    analysis?
     How can we use this to evaluate
    profitability, risk, and growth?
    3
    Why Look at Ratios?
     compare a company’s performance
    with itself overtime or a company
    versus competitors within its industry
     a basis for evaluating suppliers and
    customers
     Useful in historical analysis as well as
    projecting performance
    End Users of Ratios
     Lenders – judge a company’s ability
    to repay loans
     Managers – look at gross margins to
    keep costs under control
     Investors can compare their
    company against the competition
    and the rest of the industry
    Making Sense out of Ratios
     Trend Analysis
     How a company does over time

     Peer Group Analysis


     The company vs other competitors

     Industry Comparison
     Company vs the Industry
    Categories of Ratios
     Liquidity
     Look at the ability of a company to meet
    its short term obligations
     How cash rich a company is will determine
    its liquidity
     Can required payments be met?

    2 Ratios
     Current Ratio
     Quick Ratio
    Categories of Ratios
     Asset Management
     How effective is the firm in managing it’s
    assets?
     How effective is the firm in using its assets
    to generate sales?
    3 Ratios
     Total Asset Turnover
     Fixed Asset Turnover
     Inventory Turnover
    Categories of Ratios
     Debt Management Ratios
     How is the company financed?
     What is the mix of debt and equity?
     Does it generate enough cash flow to
    cover interest payments?
    3 Ratios
     Debt Ratio
     Tie Ratio
     Debt to Equity Ratio
    Categories of Ratios
     Profitability

     How profitable is the company?


     Is the company generating the right
    returns on the assets deployed and
    capital invested?
     Are sales high enough to maintain
    profitability?
    Categories of Ratios
    2 Ratios focusing on profit margins
     Gross Profit Margin
     Net Profit Margin

    2 Ratios focusing on returns


     Return on Assets
     Return on Equity
    Categories of Ratios
     Market Value Ratios
     How is the company’s value reflected in
    the stock market?
     Is the company under or over-valued vis a
    vis it’s peers
    2 Ratios
     Price / Earnings

     Price / Book Value

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