Ratio analysis 1. Liquidity ratio The liquidity ratios measure the company’s ability to meet its short-term debt obligations (Intermediate accounting- Kieso‚ D.E.‚ J.J. Weygandt and T.D. Warfield). These ratios include current ratios‚ quick ratios‚ and cash ratio. Current ratio: the current ratio of GM has increased from 1.29 in 2012 to 1.30 in 2013. With a higher ratio in 2013‚ it’s better for GM to meet its short-term obligation. Quick ratio: the quick ratio of GM has improved from 0.79 in 2012
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Ratio Analysis Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratio analysis focuses on three key aspects of a business: liquidity‚ profitability‚ and solvency. Liquidity Ratios Liquidity ratios measure the ability of a company to repay its short‐term debts and meet unexpected cash needs. Current ratio The current
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GROUP 1 REPORT FINANCIAL RATIOS Financial ratios are useful indicators of a firm’s performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm’s financials to those of other firms. In some cases‚ ratio analysis can predict future bankruptcy. SOURCES OF DATA FOR FINANCIAL RATIOS Balance Sheet Income Statement Statement of Cash Flows Statement of Retained
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reported on the financial statements. 1) Return on Equity: One of the most important profitability ratios is return on equity (ROE). ROE is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The return on equity ratio is computed as follows: Return on Equity = | Net Income | | Average Shareholder’s Equity | Simply
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1) Current Ratio The ratio is mainly used to give an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash‚ inventory‚ receivables). The higher the current ratio‚ the more capable the company is of paying its obligations. 2) Quick Ratio An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. For this reason‚ the ratio excludes inventories
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Profitability Ratios Profitability Ratios attempt to measure the firm’s success in generating income. These ratios reflect the combined effects of the firm’s asset and debt management. Profit Margin The Profit Margin indicates the dollars in income that the firm earns on each dollar of sales. This ratio is calculated by dividing Net Income by Sales. Return on Assets (ROA) and Return on Equity (ROE) The Return on Assets Ratio indicates the dollars in income earned by the firm on its assets
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FINANCIAL RATIOS LIQUIDITY RATIOS Current Ratio: = current assets / current liabilities ▪ The higher the ratio‚ the greater the "cushion" between current obligations and a firm ’s ability to meet them. ▪ Use: An indication of a company ’s ability to meet short-term debt obligations; the higher the ratio‚ the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities
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Current Ratio: The current ratio gauges how capable a business is in paying current liabilities by using current assets only. Current ratio is also called the working capital ratio. A general rule of thumb for the current ratio is 2 to 1. However‚ an industry average may be a better standard than this rule of thumb. So‚ according to the information that we got‚ in 2007 Beximco Pharmaceutical’s current ratio was 1.80 which declined to 1.10 in 2008 and ultimately in 2009 it boosted up to 2.97‚ that
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Ratio Analysis Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm’s financial performance in several key areas. The ratios are categorized as Short-term Solvency Ratios‚ Debt Management Ratios‚ Asset Management Ratios‚ Profitability Ratios‚ and Market Value Ratios. Ratio Analysis as a tool possesses several important features. The data‚ which are provided by financial statements‚ are readily available. The computation of ratios facilitates
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Nadarajan AC089637 3 Thayasiri Sumaran AC089676 4 Khesanivarni Balakrishnan AC089702 Table of Content Pages 1.0 Introduction 3 2.0 Company Background 4 3.0 Profitability Ratio 5-6 4.0 Liquidity Ratio 7-8 5.0 Efficiency Ratio 9-10 6.0 Gearing Ratio 11-12 7.0 Shareholder Ratio 13-14 8.0 Cash Flow 15 9.0 Conclusion 16 10.0 Reference 17 11.0 Appendix 18 1.0 INTRODUCTION British American Tobacco (informally BAT) is a British multinational tobacco
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