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Munched International Business School, Pane Presented By: Viand Pratt (63) Ratio Analysis It’s a tool which enables the banker or lender to arrive at the following factors : 0 Liquidity position 0 Profitability 0 Solvency 0 Financial Stability 0 Quality of the Management 0 Safety & Security of the loans & advances to be or already been provided How a Ratio is expressed?
Dads Percentage – such as 25% or 50% . For example if net profit is RSI. 25,000/and the sales is then the net profit can be said to be 25% of the sales. 0 As Proportion The above figures may be expressed in terms of the relationship between net profit to sales as 1 : 4. U As Pure Under / Limes – I nee same can also be expressed in an alternatively way such as the sale is 4 times of the net profit or profit is 14th of the sales.
Classification of Ratios Balance Sheet Ratio Ratio or Income/Revenue Statement Ratio and Profit & Loss Financial Ratio Operating Ratio Composite Ratio Current Ratio Quick Asset Ratio Proprietary Ratio Debt Equity Ratio Gross Profit Ratio Expense Ratio Net profit Ratio Stock Turnover Ratio Fixed Asset Turnover Ratio, Return on Total Resources Ratio, Return on Own Funds Ratio,
Preliminary or Preoperative expenses Some important notes Liabilities have Credit balance and Assets have Debit balance Current Liabilities are those which have either become due for payment or shall fall due for payment within 12 months from the date of Current Assets are those which undergo change in their shape/form within 12 months.
These are also called Working Capital or Gross Working Capital Net Worth & Long Term Liabilities are also called Long Term Sources of Funds Current Liabilities are known as Short Term Sources of Funds Assets other than Current Assets are Long Term Use of Funds Installments of Term Loan Payable in 12 months re to be taken as Current Liability only for Calculation of Current Ratio & Quick Ratio. If there is profit it shall become part of Net Worth under the head Reserves and if there is loss it will become part of Intangible Assets Investments In Gobo. Cruelest to De treated currently if these are marketable and due.