Beruflich Dokumente
Kultur Dokumente
II
RONY P RAJAN
17MBA0050 VITBS
1. RATIOS:
LIQUIDITY
CURRENT RATIO
Current ratio is the most widely used ratio. It is the ratio to current asset to current liability. It shows a
firm’s ability to cover liabilities with its current assets.
Company-B=2.8
For the above analysis both the company have their standard norm of current ratio is 2:1,but
company B short term financial position is more strong that of A.
Quick ratio
This the ratio of liquid assets to liquid liabilities. It shows a firm’s ability to meet current liabilities with
its most liquid assets . 1:1 is the standard norm of this ratio.
Company-B=0.3
For the above analysis both the company have their ratios less than the ideal norms which suggests
that the liquidity positions of the company for two the years are not up to the company’s benchmarks.
2. PROFITABILITY RATIOS
GROSS PROFIT RATIO:
The ratio tells gross margin on trading and is calculated as under:
Higher the ratio the better it is. A low ratio indicates unfavourable trend in the form of reduction in
selling prices not accompanied by proportionate decrease in cost of goods or increase in cost of
production
Company-A =25%
Company-B=15%
Here the companyA RATIO is better when the ratio is compared with company B.
Company-A =4%
Company-B =4%
The higher ratio the better is the profitability or performance of the company.In this case both the profit
of the company is not up to the benchmark.
Company-A =18%
Company-B =8%
From the above analysis and return on investment of company A is much higher than company
B.Company A is using their assets effectively.
3.SOLVENCY RATIOS
Capital gearing ratio is a useful tool to analyze the capital structure of a company and is
computed by dividing the common stockholders’ equity by fixed interest or dividend bearing
funds.
Capital gearing ratio= fixed bearing securities/ Equity share holders funds
Company-A =2.0
Company-B =0.5
Company-A =4%
Company-B =4%
The investment turnover ratio tells the investor-analyst how effectively a company uses its resources to
generate revenues.In this case company A & B turn over ratio is less