A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise 's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm 's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.
Ratio analysis involves method of calculating and interpreting financial ratios to analyze and monitor the firms’ performance. The basic input to ratio analysis is the income statement and balance sheet.
Abbreviations and Terminology
Various abbreviations may be used in financial statements, especially financial statements summarized on the Internet. Sales reported by a firm are usually net sales, which deduct returns, allowances, and early payment discounts from the charge on an invoice.Net income is always the amount after taxes, depreciation, amortization, and interest, unless otherwise stated. Otherwise, the amount would be EBIT, or EBITDA (see below).
Companies that are primarily involved in providing services with labor do not generally report "Sales" based on hours. These companies tend to report "revenue" based on the monetary value of income that the services provide.
Note that Shareholder 's Equity and Owner 's Equity are not the same thing, Shareholder 's Equity represents the total number of shares in the company multiplied by each share 's book value; Owner 's Equity represents the total number of shares that an individual shareholder owns (usually the owner with controlling interest), multiplied by each share 's book value. It is important to make this
Bibliography: 1. http://bddrugs.com 2. BOOK: Principal of managerial Finance. By: Lawrence J Gilman 3. http://investing.businessweek.com 4. annual report of Beximco Pharma 5. http://www.beximco-pharma.com 6. http://en.wikipedia.org