ratio analysis essay example

• Search Search Please fill out this field.
• Building Your Business
• Operations & Success

Financial Ratio Analysis Tutorial With Examples

The Balance Sheet for Financial Ratio Analysis

The income statement for financial ratio analysis, analyzing the liquidity ratios, the current ratio, the quick ratio, analyzing the asset management ratios accounts receivable, receivables turnover, average collection period, inventory, fixed assets, total assets, inventory turnover ratio, fixed asset turnover, total asset turnover, analyzing the debt management ratios, debt-to-asset ratio, times interest earned ratio, fixed charge coverage, analyzing the profitability ratios, net profit margin, return on assets, return on equity, financial ratio analysis of xyz corporation.

While it may be more fun to work on marketing efforts, the financial management of a firm is a crucial aspect of owning a business. Financial ratios help break down complex financial information into key details and relationships. Financial ratio analysis involves studying these ratios to learn about the company's financial health.

Here are a few of the most important financial ratios for business owners to learn, what they tell you about the company's financial statements, and how to use them.

Key Takeaways

• Some of the most important financial ratios for business owners include the current ratio, the inventory turnover ratio, and the debt-to-asset ratio.
• These financial ratios quickly break down the complex information from financial statements .
• Financial ratios are snapshots, so it's important to compare the information to previous periods of data as well as competitors in the industry.

Here is the balance sheet we are going to use for our financial ratio tutorial. You will notice there are two years of data for this company so we can do a time-series (or trend) analysis and see how the firm is doing across time.

Here is the complete income statement for the firm for which we are doing financial ratio analysis. We are doing two years of financial ratio analysis for the firm so we can compare them.

Refer back to the income statement and balance sheet as you work through the tutorial.

The first ratios to use to start getting a financial picture of your firm measure your liquidity, or your ability to convert your current assets to cash quickly. They are two of the 13 ratios. Let's look at the current ratio and the quick (acid-test) ratio .

The current ratio measures how many times you can cover your current liabilities. The quick ratio measures how many times you can cover your current liabilities without selling any inventory and so is a more stringent measure of liquidity.

Remember that we are doing a time series analysis, so we will be calculating the ratios for each year.

Current Ratio : For 2022, take the Total Current Assets and divide them by the Total Current Liabilities. You will have: Current Ratio = 642/543 = 1.18X. This means that the company can pay for its current liabilities 1.18 times over. Practice calculating the current ratio for 2023.

Your answer for 2023 should be 1.31X. A quick analysis of the current ratio will tell you that the company's liquidity has gotten just a little bit better between 2022 and 2023 since it rose from 1.18X to 1.31X.

Quick Ratio : In order to calculate the quick ratio, take the Total Current Ratio for 2022 and subtract out Inventory. Divide the result by Total Current Liabilities. You will have: Quick Ratio = (642-393)/543 = 0.46X. For 2023, the answer is 0.52X.

Like the current ratio, the quick ratio is rising and is a little better in 2023 than in 2022. The firm's liquidity is getting a little better. The problem for this company, however, is that they have to sell inventory to pay their short-term liabilities and that is not a good position for any firm to be in. This is true in both 2022 and 2023.

This firm has two sources of current liabilities: accounts payable and notes payable. They have bills that they owe to their suppliers (accounts payable) plus they apparently have a bank loan or a loan from some alternative source of financing. We don't know how often they have to make a payment on the note.

Asset management ratios are the next group of financial ratios that should be analyzed. They tell the business owner how efficiently they employ their assets to generate sales. Assume all sales are on credit.

• Receivables Turnover = Credit Sales/Accounts Receivable
• Receivables Turnover = 2,311/165 = 14X

A receivables turnover of 14X in 2022 means that all accounts receivable are cleaned up (paid off) 14 times during the 2022 year. For 2023, the receivables turnover is 15.28X. Look at 2022 and 2023 Sales in The Income Statement and Accounts Receivable in The Balance Sheet.

The receivables turnover is rising from 2022 to 2023. We can't tell if this is good or bad. We would really need to know what type of industry this firm is in and get some industry data to compare to.

Customers paying off receivables is, of course, good. But, if the receivables turnover is way above the industry's, then the firm's credit policy may be too restrictive.

The average collection period is also about accounts receivable. It is the number of days, on average, that it takes a firm's customers to pay their credit accounts. Together with receivables turnover, the average collection helps the firm develop its credit and collections policy.

• Average Collection Period = Accounts Receivable/Average Daily Credit Sales
• To arrive at average daily credit sales, take credit sales and divide by 360
• Average Collection Period = $165/2,311/360 = $165/6.42 = 25.7 days
• In 2023, the average collection period is 23.5 days

From 2022 to 2023, the average collection period is dropping. In other words, customers are paying their bills more quickly. Compare that to the receivables turnover ratio. Receivables turnover is rising and the average collection period is falling.

This makes sense because customers are paying their bills faster. The company needs to compare these two ratios to industry averages. In addition, the company should take a look at its credit and collections policies to be sure they are not too restrictive. Take a look at the image above and you can see where the numbers came from on the balance sheets and income statements.

Along with the accounts receivable ratios that we analyzed above, we also have to analyze how efficiently we generate sales with our other assets: inventory, plant and equipment, and our total asset base.

The inventory turnover ratio is one of the most important ratios a business owner can calculate and analyze. If your business sells products as opposed to services, then inventory is an important part of your equation for success.

Inventory Turnover = Sales/Inventory

If your inventory turnover is rising, that means you are selling your products faster. If it is falling, you are in danger of holding obsolete inventory. A business owner has to find the optimal inventory turnover ratio where the ratio is not too high and there are no stockouts or too low where there is obsolete money. Both are costly to the firm.

For this company, their inventory turnover ratio for 2022 is:

Inventory Turnover Ratio = Sales/Inventory = 2,311/393 = 5.9X

This means that this company completely sells and replaces its inventory 5.9 times every year. In 2023, the inventory turnover ratio is 6.8X. The firm's inventory turnover is rising. This is good in that they are selling more products. The business owner should compare the inventory turnover with the inventory turnover ratio of other firms in the same industry.

The fixed asset turnover ratio analyzes how well a business uses its plant and equipment to generate sales. A business firm does not want to have either too little or too much plant and equipment. For this firm for 2022:

Fixed Asset Turnover = Sales/Fixed Assets = 2,311/2,731 = 0.85X

For 2023, the fixed asset turnover is 1.00. The fixed asset turnover ratio is dragging down this company. They are not using their plant and equipment efficiently to generate sales as, in both years, fixed asset turnover is very low.

The total asset turnover ratio sums up all the other asset management ratios. If there are problems with any of the other total assets, it will show up here, in the total asset turnover ratio.

Total Asset Turnover = Sales/Total Asset Turnover = Sales/Total Assets = 2,311/3,373 = 0.69X for 2022. For 2023, the total asset turnover is 0.80. The total asset turnover ratio is somewhat concerning since it was not even 1X for either year.

This means that it was not very efficient. In other words, the total asset base was not very efficient in generating sales for this firm in 2022 or 2023. Why?

It seems that most of the problem lies in the firm's fixed assets. They have too much plant and equipment for their level of sales. They either need to find a way to increase their sales or sell off some of their plant and equipment. The fixed asset turnover ratio is dragging down the total asset turnover ratio and the firm's asset management in general.

There are three debt management ratios that help a business owner evaluate the company in light of its asset base and earning power. Those ratios are the debt-to-asset ratio, the times interest earned ratio , and the fixed charge coverage ratios. Other debt management ratios exist, but these help give business owners the first look at the debt position of the company and the prudence of that debt position.

The first debt ratio that is important for the business owner to understand is the debt-to-asset ratio ; in other words, how much of the total asset base of the firm is financed using debt financing. For example. the debt-to-asset ratio for 2022 is:

Total Liabilities/Total Assets = $1,074/3,373 = 31.8%. This means that 31.8% of the firm's assets are financed with debt. In 2023, the debt ratio is 27.8%. In 2023, the business is using more equity financing than debt financing to operate the company.

We don't know if this is good or bad since we do not know the debt-to-asset ratio for firms in this company's industry. However, we do know that the company has a problem with its fixed asset ratio which may be affecting the debt-to-asset ratio.

The times interest earned ratio tells a company how many times over a firm can pay the interest that it owes. Usually, the more times a firm can pay its interest expense the better. The times interest earned ratio for this firm for 2022 is:

• Times Interest Earned = Earnings Before Interest and Taxes/Interest = 276/141 = 1.96X
• For 2023, the times interest earned ratio is 3.35

The times interest earned ratio is very low in 2022 but better in 2023. This is because the debt-to-asset ratio dropped in 2023.

The fixed charge coverage ratio is very helpful for any company that has any fixed expenses they have to pay. One fixed charge (expense) is interest payments on debt, but that is covered by the times interest earned ratio.

Another fixed charge would be lease payments if the company leases any equipment, a building, land, or anything of that nature. Larger companies have other fixed charges which can be taken into account.

• Fixed charge coverage = Earnings Before Fixed Charges and Taxes/Fixed Charges

In both 2022 and 2023 for the company in our example, its only fixed charge is interest payments. So, the fixed charge coverage ratio and the times interest earned ratio would be exactly the same for each year for each ratio.

The last group of financial ratios that business owners usually tackle are the profitability ratios as they are the summary ratios of the 13 ratio group. They tell the business firm how they are doing on cost control, efficient use of assets, and debt management, which are three crucial areas of the business.

The net profit margin measures how much each dollar of sales contributes to profit and how much is used to pay expenses. For example, if a company has a net profit margin of 5%, this means that 5 cents of every sales dollar it takes in goes to profit and 95 cents goes to expenses. For 2022, here is XYZ, Inc.'s net profit margin:

Net Profit Margin = Net Income/Sales Revenue = 89.1/2,311 = 3.9%

For 2023, the net profit margin is 6.5%, so there was quite an increase in their net profit margin. You can see that their sales took quite a jump but their cost of goods sold rose. It is the best of both worlds when sales rise and costs fall. Bear in mind: The company can still have problems even if this is the case.

The return on assets ratio, also called return on investment , relates to the firm's asset base and what kind of return they are getting on their investment in their assets. Look at the total asset turnover ratio and the return on asset ratio together. If total asset turnover is low, the return on assets is going to be low because the company is not efficiently using its assets.

Another way to look at the return on assets is in the context of the Dupont method of financial analysis. This method of analysis shows you how to look at the return on assets in the context of both the net profit margin and the total asset turnover ratio.

• To calculate the Return on Assets ratio for XYZ, Inc. for 2022, here's the formula:
• Return on Assets = Net Income/Total Assets = 2.6%

For 2023, the ROA is 5.2%. The increased return on assets in 2023 reflects the increased sales and much higher net income for that year.

The return on equity ratio is the one of most interest to the shareholders or investors in the firm. This ratio tells the business owner and the investors how much income per dollar of their investment the business is earning. This ratio can also be analyzed by using the Dupont method of financial ratio analysis. The company's return on equity for 2022 was:

Return on Equity = Net Income/Shareholder's Equity = 3.9%

For 2023, the return on equity was 7.2%. One reason for the increased return on equity was the increase in net income. When analyzing the return on equity ratio, the business owner also has to take into consideration how much of the firm is financed using debt and how much of the firm is financed using equity.

Now we have a summary of all 13 financial ratios for XYZ Corporation. The first thing that jumps out is the low liquidity of the company. We can look at the current and quick ratios for 2022 and 2023 and see that the liquidity is slightly increasing between 2022 and 2023, but it is still very low.

By looking at the quick ratio for both years, we can see that this company has to sell inventory in order to pay off short-term debt. The company does have short-term debt: accounts payable and notes payable, and we don't know when the notes payable will come due.

Let's move on to the asset management ratios. We can see that the firm's credit and collections policies might be a little restrictive by looking at the high receivable turnover and low average collection period. Customers must pay this company rapidly—perhaps too rapidly. There is nothing particularly remarkable about the inventory turnover ratio, but the fixed asset turnover ratio is remarkable.

The fixed asset turnover ratio measures the company's ability to generate sales from its fixed assets or plant and equipment. This ratio is very low for both 2022 and 2023. This means that XYZ has a lot of plant and equipment that is unproductive.

It is not being used efficiently to generate sales for the company. In addition, the company has to service the plant and equipment, pay for breakdowns, and perhaps pay interest on loans to buy it through long-term debt.

It seems that a very low fixed asset turnover ratio might be a major source of problems for XYZ. The company should sell some of this unproductive plant and equipment, keeping only what is absolutely necessary to produce their product.

The low fixed asset turnover ratio is dragging down total asset turnover. If you follow this analysis through, you will see that it is also substantially lowering this firm's return on assets profitability ratio.

With this firm, it is hard to analyze the company's debt management ratios without industry data. We don't know if XYZ is a manufacturing firm or a different type of firm.

As a result, analyzing the debt-to-asset ratio is difficult. What we can see, however, is that the company is financed more with shareholder funds (equity) than it is with debt as the debt-to-asset ratio for both years is under 50% and dropping.

This fact means that the return on equity profitability ratio will be lower than if the firm was financed more with debt than with equity. On the other hand, the risk of bankruptcy will also be lower.

Unfortunately, you can see from the times interest earned ratio that the company does not have enough liquidity to be comfortable servicing its debt. The company's costs are high and liquidity is low. Fortunately, the company's net profit margin is increasing because their sales are increasing.

Hopefully, this is a trend that will continue. Return on Assets is impacted negatively due to the low fixed asset turnover ratio and, to some extent, by the receivables ratios. Return on equity is increasing from 2022 to 2023, which will make investors happy.

As you can see, it is possible to do a cursory financial ratio analysis of a business firm with only 13 financial ratios, even though ratio analysis has inherent limitations.

Julie Dahlquist, Rainford Knight. " Principles of Finance: 6.2 Operating Efficiency Ratios ." OpenStax.

U.S. Small Business Administration. " Calculate & Analyze Your Financial Ratios ," Pages 2, 4.

U.S. Small Business Administration. " Calculate & Analyze Your Financial Ratios ," Pages 3, 6.

Julie Dahlquist, Rainford Knight. " Principles of Finance: 6.4 Solvency Ratios ." OpenStax.

Nasdaq. " Fixed-Charge Coverage Ratio ."

U.S. Small Business Administration. " Calculate & Analyze Your Financial Ratios ," Pages 3, 5.

Julie Dahlquist, Rainford Knight. " Principles of Finance: 6.6 Profitability Ratios and the DuPont Method ." OpenStax.

• Search Search Please fill out this field.

What Is Ratio Analysis?

• How It Works
• Limitations
• Application
• Ratio Analysis FAQs

The Bottom Line

• Corporate Finance
• Financial Ratios

Financial Ratio Analysis: Definition, Types, Examples, and How to Use

• Valuing a Company: Business Valuation Defined With 6 Methods
• Valuation Analysis
• Financial Statements
• Balance Sheet
• Cash Flow Statement
• 6 Basic Financial Ratios
• 5 Must-Have Metrics for Value Investors
• Earnings Per Share (EPS)
• Price-to-Earnings Ratio (P/E Ratio)
• Price-To-Book Ratio (P/B Ratio)
• Price/Earnings-to-Growth (PEG Ratio)
• Fundamental Analysis
• Absolute Value
• Relative Valuation
• Intrinsic Value of a Stock
• Intrinsic Value vs. Current Market Value
• Equity Valuation: The Comparables Approach
• 4 Basic Elements of Stock Value
• How to Become Your Own Stock Analyst
• Due Diligence in 10 Easy Steps
• Determining the Value of a Preferred Stock
• Qualitative Analysis
• Stock Valuation Methods
• Bottom-Up Investing
• Ratio Analysis CURRENT ARTICLE
• What Book Value Means to Investors
• Liquidation Value
• Market Capitalization
• Discounted Cash Flow (DCF)
• Enterprise Value (EV)
• How to Use Enterprise Value to Compare Companies
• How to Analyze Corporate Profit Margins
• Return on Equity (ROE)
• Decoding DuPont Analysis
• How to Value Private Companies
• Valuing Startup Ventures

Ratio analysis is a method of examining a company's balance sheet and income statement to learn about its liquidity, operational efficiency, and profitability. It doesn't involve one single metric; instead, it is a way of analyzing a variety of financial data about a company. Ratio analysis is a cornerstone of fundamental equity analysis .

There are many different ratios that investors and other business experts can analyze to make predictions about a company's financial stability and potential future growth. These can be used to evaluate either how a company's performance has changed over time or how it compares to other businesses in its industry.

Key Takeaways

• Ratio analysis compares line-item data from a company's financial statements to evaluate it profitability, liquidity, efficiency, and solvency.
• Ratio analysis can track how a company is performing over time or how it compares to another business in the same industry or sector.
• Ratio analysis may also be required by external parties that set benchmarks often tied to risk, such as lenders.
• While ratios offer useful insight into a company, they should be paired with other metrics to obtain a broader picture of a company's financial health.
• Examples of ratio analysis include the current ratio, gross profit margin ratio, and inventory turnover ratio.

Investopedia / Theresa Chiechi

How Ratio Analysis Works

Investors and analysts use ratio analysis to evaluate the financial health of companies by scrutinizing past and current financial statements. For example, comparing the price per share to earnings per share allows investors to find the price-to-earnings (P/E) ratio , a key metric for determining the value of a company's stock.

The ratios of these different financial metrics from a company can be used to:

• Evaluate a company's performance over time
• Estimate likely future performance
• Compare a company's financial standing with industry averages
• Measuring how a company stacks up against others within the same sector

Every figure needed to calculate the ratios used in ratio analysis is found on a company's financial statements.

A ratio is the relation between two amounts showing the number of times one value contains or is contained within the other.

Ratios are comparison points for companies and are not generally used in isolation. Instead, they are compared either to past ratios for the same company or to the same ratio from other companies.

For example, if the average P/E ratio of all companies in the S&P 500 index is 20, and the majority of companies have P/Es between 15 and 25, a stock with a P/E ratio of seven is probably undervalued. In contrast, one with a P/E ratio of 50 likely is overvalued. The former may trend upwards in the future, while the latter may trend downwards until each aligns with its intrinsic value.

Ratio analysis is often used by investors, but it can also be used by the company itself to evaluate how strategic changes have impacted sales, growth, and performance.

Limitations of Ratio Analysis

Ratio analysis can help investors understand a company's current performance and likely future growth. However, companies can make small changes that make their stock and company ratios more attractive without changing any underlying financial fundamentals. To counter this limitation, investors also need to understand the variables behind ratios, what information they do and do not communicate, and how they are susceptible to manipulation.

Ratios also can't be used in isolation. Instead, they should be used in combination with other ratios or financial metrics to give a fuller picture of both a company's financial state and how it compares to other companies in the same industry.

Types of Ratios for Ratio Analysis

The financial ratios available can be broadly grouped into six types based on the kind of data they provide. Using ratios in each category will give you a comprehensive view of the company from different angles and help you spot potential red flags.

1. Liquidity Ratios

Liquidity ratios measure a company's ability to pay off short-term debts as they become due, using the company's current or quick assets. Liquidity ratios include:

• Current ratio
• Quick ratio
• Working capital ratio

2. Solvency Ratios

Also called financial leverage ratios, solvency ratios compare a company's debt levels with its assets, equity, and earnings. These are used to evaluate the likelihood of a company staying afloat over the long haul by paying off both long-term debt and the interest on that debt. Examples of solvency ratios include:

• Debt-equity ratios
• Debt-assets ratios
• Interest coverage ratios

3. Profitability Ratios

These ratios convey how well a company can generate profits from its operations. Examples of profitability ratios are:

• Profit margin ratio
• Return on assets
• Return on equity
• Return on capital employed
• Gross margin ratio

4. Efficiency Ratios

Also called activity ratios, efficiency ratios evaluate how efficiently a company uses its assets and liabilities to generate sales and maximize profits. Key efficiency ratios include:

• Turnover ratio
• Inventory turnover
• Day's sales in inventory

5. Coverage Ratios

Coverage ratios measure a company's ability to make the interest payments and other obligations associated with its debts. Examples include:

• Times interest earned ratio
• Debt-service coverage ratio

6. Market Prospect Ratios

Market prospect ratios are the most commonly used ratios in fundamental analysis. Investors use these metrics to predict earnings and future performance. These ratios include:

• Dividend yield
• Earnings per share (EPS)
• Dividend payout ratio

Most ratio analysis is only used for internal decision making. Though some benchmarks are set externally (discussed below), ratio analysis is often not a required aspect of budgeting or planning.

Application of Ratio Analysis

Using ratio analysis will give you multiple figures and values to compare. However, those values will mean very little in isolation. Instead, the values derived from these ratios should be compared to other data to determine whether a company's financial health is strong, weak, improving, or deteriorating.

Ratio Analysis Over Time

Comparing how the same ratio changes over time provides a picture of how a company has performed during that period, what risks might exist in the future, and what growth trajectory growth it is likely to follow.

To perform ratio analysis over time, select a single financial ratio, then calculate that ratio at set intervals (for example, at the beginning of every quarter). Then, analyze how the ratio has changed over time (whether it is improving, the rate at which it is changing, and whether the company wanted the ratio to change over time).

When performing ratio analysis over time, be mindful of seasonality and how temporary fluctuations may impact month-over-month ratio calculations.

Comparative Ratio Analysis Across Companies

Comparative ratio analysis can be used to understand how a company's performance compares to similar companies in the same industry. For example, a company with a 10% gross profit margin may be in good financial shape if other companies in the same sector have gross profit margins of 5%. However, if the majority of competitors achieve gross profit margins of 25%, that's a sign that the original company may be in financial trouble.

When using ratio analysis to compare different companies, be sure to:

• Only analyze similar companies within the same industry .
• Be mindful of how different capital structures and company sizes may impact a company's ability to be efficient.
• Consider the impact of varying product lines (for example, two companies offer similar services, but only one sells physical products).

Different industries have different ratio expectations. A debt-equity ratio that might be normal for a utility company that can obtain low-cost debt might be deemed unsustainably high for a technology company that relies more heavily on private investor funding.

Ratio Analysis Against Benchmarks

Companies may set internal targets for their financial ratios. The goal may be to hold current levels steady or to strive for operational growth. For example, a company's existing current ratio may be 1.1; if the company wants to become more liquid, it may set the internal target of having a current ratio of 1.2 by the end of the fiscal year.

Benchmarks are also frequently implemented by external parties such as lenders. Lending institutions often set requirements for financial health as part of covenants in loan document's terms and conditions. An example of a benchmark set by a lender is often the debt service coverage ratio, which measures a company's cash flow against its debt balances. If a company doesn't maintain certain levels for these ratios, the loan may be recalled or the interest rate attached to that loan may increase.

Examples of Ratio Analysis in Use

Ratio analysis can predict a company's future performance — for better or worse. When a company generally boasts solid ratios in all areas, any sudden hint of weakness in one area may spark a significant stock sell-off.

For example, net profit margin , often referred to simply as profit margin or the bottom line, is a ratio that investors use to compare the profitability of companies within the same sector. It's calculated by dividing a company's net income by its revenues and is often used instead of dissecting financial statements to compare how profitable companies are. If company ABC and company DEF are in the same sector with profit margins of 50% and 10%, respectively, an investor comparing the two companies will conclude that ABC converted 50% of its revenues into profits, while DEF only converted 10%.

This can be combined with additional ratios to learn more about the companies in question. If ABC has a P/E ratio of 100 and DEF has a P/E ratio of 10, that means investors are willing to pay $100 per $1 of earnings ABC generates and only $10 per $1 of earnings DEF generates.

What Are the Types of Ratio Analysis?

Financial ratio analysis is often broken into six different types: profitability, solvency, liquidity, turnover, coverage, and market prospects ratios. Other non-financial metrics may be scattered across various departments and industries. For example, a marketing department may use a conversion click ratio to analyze customer capture.

What Are the Uses of Ratio Analysis?

Ratio analysis serves three main uses. First, ratio analysis can be performed to track changes within a company's financial health over time and predict future performance. Second, ratio analysis can be performed to compare results between competitors. Third, ratio analysis can be performed to strive for specific internally-set or externally-set benchmarks.

Why Is Ratio Analysis Important?

Ratio analysis can be used to understand the financial and operational health of a company; static numbers on their own may not fully explain how a company is performing. Consider a business that made $1 billion in revenue last quarter. Though this seems ideal, the company might have had a negative gross profit margin, a decrease in liquidity ratio metrics, and lower earnings compared to equity than in prior periods. This means the company is performing below its competitors in spite of its high revenue.

What Is an Example of Ratio Analysis?

Consider the inventory turnover ratio that measures how quickly a company converts inventory to a sale. A company can track its inventory turnover over a full calendar year to see how quickly it converted goods to cash each month. Then, a company can explore the reasons certain months lagged or why certain months exceeded expectations.

There is often an overwhelming amount of data and information useful for a company to make decisions. To make better use of their information, a company may compare several numbers together. This process called ratio analysis allows a company to gain better insights to how it is performing over time, against competition, and against internal goals. Ratio analysis is usually rooted heavily with financial metrics, though ratio analysis can be performed with non-financial data.

• Terms of Service
• Editorial Policy
• Privacy Policy

• Financial Ratio Analysis of the Restaurant Words: 538
• The Limitations of Financial Ratios Words: 568
• Financial Ratios: Management and Analysis Words: 1385
• Accurate Financial Statements: Analysis and Use Words: 1421
• Published Financial Statements and Their Objectives Words: 2768
• The ABC Nonprofit Financial Statement Analysis Words: 875
• Researching of Financial Ratios Words: 201
• Financial Analysis of Marks and Spencer Words: 2784
• KasikomBank and Its Financial Analysis Words: 4397
• Rondo Company: Financial Statement Analysis Words: 974
• The Ivory Furniture Company’s Financial Analysis Words: 1220
• The Walt Disney Company: A Financial Ratio Analysis Words: 2339
• Financial Statement Analysis: Seven Crucial Components Words: 935
• Financial and Management Accounting: The Analysis of Financial Systems Words: 3582
• Economics and Financial Issues Words: 3062
• Starbucks Company’ Financial Analysis Words: 1111
• Financial Statement and Its Four Types Words: 1013
• Medco International Firm’s Financial Analysis Words: 998
• Investment in Facebook Financial Statements Words: 996
• Financial Statements and Their Significance Words: 395
• Debenhams Plc: Company’s Financial Accounting Words: 2077

Ratio and Financial Statement Analysis

Executive summary, introduction, liquidity ratios, profitability, investors’ ratios, benefits and limitations, new practices, conclusion and recommendation.

Financial ratios show associations between various factors of the business operations. They entail comparison of income statement and balance sheet’s elements. These ratios are grouped into four distinct categories; liquidity ratios (Quick and current ratios), profitability ratios (ROE and ROA), leverage (debt-equity ratio and debt-to-assets ratio) and investors’ ratios (EPS and P/E). These ratios are beneficial since they summarize the financial statements and make it easy for investors to understand but they do have some drawbacks like use of irrelevant information in making future decision and different users of accounting information use different terms to depict financial information among others. Therefore, investors should be aware that ratios are good measures but they cannot be used solely to make financial decision as a result of these drawbacks. Thus, investors should seek other measures like non-financial analysis by looking at management style and experience, and morale of the employees among others.

Security analysts and investors frequently use ratios to evaluate the weaknesses and strengths of various firms. Ratio analysis is important in analyzing financial statements which is a crucial step before investing in any firm since it quantifies the firm’s performance in various factors like the firm’s ability to be profitable, ability of the firm to pay debt (liquidity of the firm), stability of the firm in paying long-term debt as well as the ability of the company to manage its assets (efficiency). Ratios normally compare the firm’s performance in a certain period and against other firms in the industry in order to determine the firm’s weaknesses and strengths and for investors or managers to take suitable investment and financing decisions (Liu and O’Farrell, 2009).

It is hard to deduce the firm’s performance from two or three simple figures. Nonetheless, in practice some diverse ratios are frequently calculated during strategic planning activities and in general because financial ratios do offer information on relative performance of the firm. Particularly, careful evaluation of a mixture of the ratios might assist in making a distinction between companies that will in the end not succeed from those companies that will succeed. Therefore, ratio analysis is discussed, and some benefits and limitations linked with their usage are emphasized. Lastly, ratios are more relevant when used to evaluate firms in the same industry (Nd.edu, 2010).

For survival, companies should be able to pay creditors and other short-term obligations. In this case, firm should be concerned with its liquidity by use of measures like quick ratio and current ratio. The major difference between these two ratios is that, the former does not use stock while the latter does. Quick ratio is a conventional standard; if it is more than one it implies that the firm is not facing liquidity risk and that is it can be able to pay current liabilities. And if not more than one but current ratio is above one, the firm’s status is more composite. In such a situation, valuation of stocks and stock turnover are clearly crucial (Nd.edu, 2010).

Stock valuation methods life LIFO and FIFO may contaminate current ratio. This is because firms use different methods when valuing stocks, which may overvalue or undervalue the stocks, making it hard to compare firms using current ratio. This means that quick ratio is the most preferred liquidity ratio (Nd.edu, 2010). Consider Hyatt Hotel Corporation’s quick ratio of 2010 and 2009, the firm’s liquidity position decline in 2010, implying that the firm was using more of current liabilities in 2010 compared with 2009. Compared to other firms in the industry like Red Lion Hotels and Intercontinental Hotels Group (IHG), Hyatt is more liquid than its competitors who are facing liquidity risk since the ratio is less than one as shown by Table 1.

Companies are funded by mixture of equity and debt and the optimal capital structure depends on the tax policy, corporate risk and bankruptcy costs. Two measures are used, debt-equity ratio and debt-to-assets ratio (Nd.edu, 2010).

Just like liquidity ratios, leverage ratios pose some issues in interpretation and measurement. In this case equity and assets are normally measured through book value in financial statements, the book value does not depict the company’s market value or value the creditors would receive if firm is liquidated (Nd.edu, 2010).

Ratios like the debt-to-equity ratios differ significantly crossways industries due to industry’s characteristics and environment.

A utility firm that is more stable can operate comfortably with comparatively superior debt-equity ratio while a cyclical firm like recreational vehicles manufacturer normally requires lower ratio (Nd.edu, 2010).

Frequently analysts use debt-equity ratio to establish the capability of the firm to generate additional finances from capital market. A firm with significant debt is frequently considered to have less additional-funding capacity. In reality, the overall funding capacity of the firm possibly depends on the new product’s quality that the firm is wishing to pursue with its capital structure. Nonetheless, given bankruptcy threat and costs, a superior debt-equity ratio might make future refinance hard (Nd.edu, 2010).

For instance, debt-equity ratio of Hyatt declined in 2010 indicating a reduction in the gearing level of the firm compared to the year 2009. Compared to its competitors, Red Lion and IHG, Hyatt is less geared and IHG is highly geared among the three firms as it is more than 100%. This implies that IHG is facing high financial risks while Hyatt’s financial risk is very low as shown by Table 2.

ROE and ROA are measures of firm’s profitability and are widespread in firms. Equity and assets as utilized in these ratios are book values. Therefore, if fixed assets were bought in the past three years at a lower price, this means that the present performance of the firm might be overstated through the utilization of past information. As a consequence, accounting returns of the investment are normally not correlated well with real economic project’s IRR (Nd.edu, 2010).

It is hard to use these two ratios in merger deals to measure the firms’ performance. Assume we have a firm X that used to earn net profit of $1,000 on the assets with book value of $2,000, for a large 50% as ROA. This firm is currently acquired by another firm Y that transfer the additional assets to its balance sheet at the buying price, presuming that the transaction is treated through the use of accounting method of purchase. Actually, the purchase price will be more than $2,000, higher than the assets book value, for a possible acquirer must pay higher price for privilege of gaining $1,000 on an ordinary basis.

Assume further the firm Y pays $3,000 for X’s assets. After the purchase, it will emerge that X’s returns have decreased, Firm X continues to make $1,000 but currently the asset base is at $3,000, and thus the ROA reduces to 33.33%. In reality, ROA might reduce due to other factors like rise in depreciation of the additional assets obtained. However, nothing has happened to net income of the company but only its accounting has changed and not the firm’s performance (Nd.edu, 2010).

ROE and ROA also have another problem in that analyst tend to concentrate on the single years performance, years that might be idiosyncratic. On average, one must evaluate these ratios over some years through use of average to separate returns that are idiosyncratic and attempt to identify patterns (Nd.edu, 2010).

For example, Hyatt’s ROE and ROA indicate that the firm’s profitability increased in 2010 implying that the firm’s efficiency in managing production costs, operating costs and cost of sales as well as assets had improved, while IHG was the most profitable firm among the three firms with, Red Lion being the least profitable firm as shown on Table 3.

These ratios are determined from the performance of the stock market and they include; P/E, Dividend Yield and EPS. EPS is widely used amongst the three ratios. In reality, it is shown on financial statements of the listed firms. EPS indicates how much each share invested in the firm has earned. This means that it is not a useful statistics since it does not show how many fixed assets the company utilized to generate those incomes, and thus nothing on profitability. It also does not show how much the shareholder has paid for each share invested in the firm for rights over the annual income. In addition, the accounting principles used to determine the income might alter these ratios and treatment of stock is also challenging (Nd.edu, 2010).

P/E ratio is also used and it is reported mainly in the daily newspapers. P/E ratio that is high indicates that the investors deem that the firm’s future prospects are superior to its present performance. They are paying more for every share than company’s present income warrant. And still the income is treated in different ways in diverse accounting practices (Nd.edu, 2010).

For example, in 2010 the EPS of Hyatt increased from 0.28 to 0.29 this means that for every share invested in the firm generated $0.29 of the firm’s earnings. Compared to competitors, Red Lion has the least EPS while IHG has the highest. The Hyatt’s P/E indicates the investors in 2009 and 2010 would take 106.46 and 157.79 years to recover their initial investment in shares from the earnings generated by that investment in the firm respectively, while its competitors’ investors will take less years for them to recover their initial investment as shown by Table 4.

Financial analysis involving ratios is a helpful tool for the users of the financial statements. Ratio analysis has some advantages that include; first, they simplify firm’s financial statements and also emphasize significant information in straightforward form quickly. Thus a user of the firm’s financial statements can judge the firm by only looking at some figures instead of examining the entire financial statements. Finally, the analysis assists in comparing firms of varying magnitude within the industry and can be used in comparing one firm financial performance over a particular period of time, normally referred as trend analysis (Accountingexplained.com, 2011).

On the other hand, the analysis poses some disadvantages in that information from the financial accounting is influenced by assumptions and estimates. Accounting standards let varying accounting policies that damages comparability and thus in such circumstances ratio analysis is used less. The ratio analysis describes relationships between historical information while the users are mostly concerned on the present and the future information. Different firms operate in diverse industries with diverse environmental conditions like market structure, and regulation among others. These factors are so important in that an evaluation of the two firms from dissimilar industries may be misleading (Accountingexplained.com, 2011).

For instance, a Chinese firm’s financial ratios might be exposed to misunderstanding by an investor from US as a result of variations in the accounting principles, institutional and culture environments, economic environments and business practices. China adopted IFRS ever since 2007 whilst firms in the United States are still applying U.S. GAAP to report accounting information (Liu and O’Farrell, 2009). The culture of China is centred on the relationships while culture of America is centred on the individuals. In addition the variation between collectivists and individualists, people of China have a tendency of being risk-adverse and conservative.

China is a socialism nation in evolution from the planned economy to the market economy while US on the other hand, is a nation having a market capitalism. These two nations have different GDP growth with China having the highest compared to US. Such variations may decrease the comparability and comprehension of information from financial accounting. The Chinese firms may be found to have lower Asset Turnover ratio probably as a result of firm’s high growth rate, superior Average Collection Period probably as a result of overstated debtors account and the requirement to guarantee steady employment, and a lower Debt to Net Worth ratio probably as a result of risk averseness nature of the Chinese individual investors (Liu and O’Farrell, 2009).

These disadvantages stirred researchers to investigate and make use of methods such as negative examination elimination, trimming, square root, logarithmic, logit as well as utilizing rank transformation in order to attain more projective independent variables (Bahiraie, 2008).

During utilization of ratios managers are more concerned with misinforming than informing. Managers therefore seek to reduce discretionary costs like advertising, training, research and maintenance among others, with the aim of increasing net profit whilst having a negative effect on the future income potential. New management might likewise write-down assets value to decrease the amortization and depreciation charges for future financial years. An entrepreneur might evade restocking inventory at some point in time especially before the end of the financial year in order to raise the firm’s current ratio. Short-term payment of the current liabilities or debt just before the end of the financial year will accomplish similar outcome. Retained earnings may be corrected for the future stock price decrease and afterwards recorded as net income.

Frequently an assessment of a sequence of the annual statements instead of one year will emphasize such practices. More excessive practices are normally avoided by companies that are required to answer to the regulatory agencies in order to be listed on the stock market or exchange (Best, 2009).

Ratios are normally utilized in strategic planning. These ratios may be manipulated through opportunistic practices of accounting. Nonetheless, taken collectively and utilized sensibly, they might assist in identifying companies or business divisions in particular problem. And finding new ventures that are profitable needs more effort. Therefore, investors should carry out their own analyses to determine which firm to invest in. Due to limitations of these ratios, the investors should also consider the non-financial analysis like the leadership style, morale of employees and experience among others.

Accountingexplained.com. (2011). Advantages and limitations of financial ratio analysis. Web.

Bahiraie, A., Ibrahim, N., Mohd, I. and Azhar, A. (2008). Financial Ratios: A new geometric transformation. International Research Journal of Finance and Economic , 20:165-171.

Best, B. (2009). The uses of financial statements . Web.

Liu, C. and O’Farrell, G. (2009). China and U.S. financial ratio comparison. International Journal of Business, Accounting, and Finance , 3(2): 1-13.

Nd.edu. (2010). Financial ratio analysis . Web.

Cite this paper

• Chicago (N-B)
• Chicago (A-D)

StudyCorgi. (2022, May 13). Ratio and Financial Statement Analysis. https://studycorgi.com/ratio-and-financial-statement-analysis/

"Ratio and Financial Statement Analysis." StudyCorgi , 13 May 2022, studycorgi.com/ratio-and-financial-statement-analysis/.

StudyCorgi . (2022) 'Ratio and Financial Statement Analysis'. 13 May.

1. StudyCorgi . "Ratio and Financial Statement Analysis." May 13, 2022. https://studycorgi.com/ratio-and-financial-statement-analysis/.

Bibliography

StudyCorgi . "Ratio and Financial Statement Analysis." May 13, 2022. https://studycorgi.com/ratio-and-financial-statement-analysis/.

StudyCorgi . 2022. "Ratio and Financial Statement Analysis." May 13, 2022. https://studycorgi.com/ratio-and-financial-statement-analysis/.

This paper, “Ratio and Financial Statement Analysis”, was written and voluntary submitted to our free essay database by a straight-A student. Please ensure you properly reference the paper if you're using it to write your assignment.

Before publication, the StudyCorgi editorial team proofread and checked the paper to make sure it meets the highest standards in terms of grammar, punctuation, style, fact accuracy, copyright issues, and inclusive language. Last updated: September 6, 2022 .

If you are the author of this paper and no longer wish to have it published on StudyCorgi, request the removal . Please use the “ Donate your paper ” form to submit an essay.

• List of Commerce Articles

Ratio Analysis

Ratio analysis is referred to as the study or analysis of the line items present in the financial statements of the company. It can be used to check various factors of a business such as profitability, liquidity, solvency and efficiency of the company or the business.

Ratio analysis is mainly performed by external analysts as financial statements are the primary source of information for external analysts.

The analysts very much rely on the current and past financial statements in order to obtain important data for analysing financial performance of the company. The data or information thus obtained during the analysis is helpful in determining whether the financial position of a company is improving or deteriorating.

Also see: Advantages and Disadvantages of Ratio Analysis

Categories of Ratio Analysis

There are a lot of financial ratios which are used for ratio analysis, for the scope of Class 12 Accountancy students. The following groups of ratios are considered in this article, which are as follows:

1. Liquidity Ratios: Liquidity ratios are helpful in determining the ability of the company to meet its debt obligations by using the current assets. At times of financial crisis, the company can utilise the assets and sell them for obtaining cash, which can be used for paying off the debts.

Some of the most commonly used liquidity ratios are quick ratio, current ratio, cash ratio, etc. The liquidity ratios are used mostly by creditors, suppliers and any kind of financial institutions such as banks, money lending firms, etc for determining the capacity of the company to pay off its obligations as and when they become due in the current accounting period.

2. Solvency Ratios: Solvency ratios are used for determining the viability of a company in the long term or in other words, it is used to determine the long term viability of an organisation.

Solvency ratios calculate the debt levels of a company in relation to its assets, annual earnings and equity. Some of the important solvency ratios that are used in accounting are debt ratio, debt to capital ratio, interest coverage ratio, etc.

Solvency ratios are used by government agencies, institutional investors, banks, etc to determine the solvency of a company.

3. Activity Ratio: Activity ratios are used to measure the efficiency of the business activities. It determines how the business is using its available resources to generate maximum possible revenue.

These ratios are also known as efficiency ratios. These ratios hold special significance for business in a way that whenever there is an improvement in these ratios, the company is able to generate revenue and profits much efficiently.

Some of the examples of activity or efficiency ratios are asset turnover ratio, inventory turnover ratio, etc.

4. Profitability ratios: The purpose of profitability ratios is to determine the ability of a company to earn profits when compared to their expenses. A better profitability ratio shown by a business as compared to its previous accounting period shows that business is performing well.

The profitability ratio can also be used to compare the financial performance of a similar firm, i.e it can be used for analysing competitor performance.

Some of the most used profitability ratios are return on capital employed, gross profit ratio, net profit ratio, etc.

Use of Ratio Analysis

Ratio analysis is useful in the following ways:

1. Comparing Financial Performance: One of the most important things about ratio analysis is that it helps in comparing the financial performance of two companies.

2. Trend Line: Companies tend to use the activity ratio in order to find any kind of trend in the performance. Companies use data from financial statements that is collected from financial statements over many accounting periods. The trend that is obtained can be used for predicting the future financial performance.

3. Operational Efficiency: Financial ratio analysis can also be used to determine the efficiency of managing the asset and liabilities. It helps in understanding and determining whether the resources of the business is over utilised or under utilised.

This concludes our article on the topic of Ratio Analysis, which is an important topic in Class 12 Accountancy for Commerce students. For more such interesting articles, stay tuned to BYJU’S.

Leave a Comment Cancel reply

Your Mobile number and Email id will not be published. Required fields are marked *

Request OTP on Voice Call

Post My Comment

Register with BYJU'S & Download Free PDFs

Register with byju's & watch live videos.

Financial Ratio Analysis

Home › Finance › Financial Ratio Analysis › Financial Ratio Analysis

Financial ratios are mathematical comparisons of financial statement accounts or categories. These relationships between the financial statement accounts help investors, creditors, and internal company management understand how well a business is performing and of areas needing improvement.

Financial ratios are the most common and widespread tools used to analyze a business’ financial standing. Ratios are easy to understand and simple to compute. They can also be used to compare different companies in different industries. Since a ratio is simply a mathematically comparison based on proportions, big and small companies can be use ratios to compare their financial information. In a sense, financial ratios don’t take into consideration the size of a company or the industry. Ratios are just a raw computation of financial position and performance.

Ratios allow us to compare companies across industries, big and small, to identify their strengths and weaknesses. Financial ratios are often divided up into seven main categories: liquidity, solvency, efficiency, profitability, market prospect, investment leverage, and coverage.

• Liquidity Ratios
• Solvency Ratios
• Efficiency Ratios
• Profitability Ratios
• Market Prospect Ratios
• Financial Leverage Ratios
• Coverage Ratios
• Receivables Turnover Ratio
• Asset Turnover Ratio
• Cash Conversion Cycle
• Compound Annual Growth Rate
• Contribution Margin
• Current Ratio
• Days Sales in Inventory
• Days Sales Outstanding
• Debt Service Coverage Ratio
• Debt to Equity Ratio
• Dividend Payout
• Dividend Yield
• DuPont Analysis
• Earnings per Share
• Equity Multiplier
• Equity Ratio
• Fixed Charge Coverage Ratio
• Gross Margin Ratio
• Interest Coverage Ratio
• Internal Rate of Return
• Inventory Turnover Ratio
• Net Working Capital
• Operating Margin Ratio
• Payables Turnover Ratio
• Price Earnings P/E Ratio
• Profit Margin Ratio
• Quick Ratio – Acid Test
• Retention Rate
• Return on Assets
• Return on Capital Employed
• Return on Equity
• Times Interest Earned Ratio
• Working Capital Ratio

Accounting & CPA Exam Expert

Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career.

• Financial Accounting Basics
• Accounting Principles
• Accounting Cycle
• Financial Statements

Financial Ratios

• Financial Ratio
• Accumulated Depreciation Ratio
• Asset Coverage Ratio
• Average Inventory Period
• Average Payment Period
• Break-Even Analysis
• Capitalization Ratio
• Cash Earnings/Share
• Cash Flow Coverage Ratio
• Correlation Coefficient
• Cost of Goods Sold
• Days Payable Outstanding
• Debt to Asset
• Debt to Capital
• Debt to Income
• Defensive Interval
• Earnings Per Share
• Enterprise Value
• Expense Ratio
• Fixed Asset Turnover Ratio
• Free Cash Flow
• Goodwill to Assets
• Gross Profit
• Gross vs Net
• Loan to Value
• Long Term Debt to Assets
• Margin of Safety
• Marginal Revenue
• Net Fixed Assets
• Net Interest Margin
• Net Operating Income
• Net Present Value (NPV)
• Net Profit Margin
• Operating Cash Flow
• Operating Income
• Operating Leverage
• Payback Period
• Preferred Dividend Coverage
• Present Value
• Price to Book
• Price to Cash Flow
• Price to Sales
• Residual Income
• Retention Ratio
• Return on Invested Capital
• Return on Investment
• Return on Net Assets
• Return on Operating Assets
• Return on Retained Earnings
• Return on Sales
• Sales to Admin Expenses
• Sharpe Ratio
• Sortino Ratio
• Treynor Ratio

What is Ratio Analysis?

Uses of ratio analysis.

• Ratio Analysis - Categories of Financial Ratios

Related Readings

Ratio analysis.

Comparisons between the financial information in the financial statements of a business

Ratio analysis refers to the analysis of various pieces of financial information in the financial statements of a business. They are mainly used by external analysts to determine various aspects of a business, such as its profitability, liquidity, and solvency.

Analysts rely on current and past financial statements to obtain data to evaluate the financial performance of a company. They use the data to determine if a company’s financial health is on an upward or downward trend and to draw comparisons to other competing firms.

1. Comparisons

One of the uses of ratio analysis is to compare a company’s financial performance to similar firms in the industry to understand the company’s position in the market. Obtaining financial ratios, such as Price/Earnings, from known competitors and comparing them to the company’s ratios can help management identify market gaps and examine its competitive advantages , strengths, and weaknesses. The management can then use the information to formulate decisions that aim to improve the company’s position in the market.

2. Trend line

Companies can also use ratios to see if there is a trend in financial performance. Established companies collect data from financial statements over a large number of reporting periods. The trend obtained can be used to predict the direction of future financial performance , and also identify any expected financial turbulence that would not be possible to predict using ratios for a single reporting period.

3. Operational efficiency

The management of a company can also use financial ratio analysis to determine the degree of efficiency in the management of assets and liabilities. Inefficient use of assets such as motor vehicles, land, and buildings results in unnecessary expenses that ought to be eliminated. Financial ratios can also help to determine if the financial resources are over- or under-utilized.

Ratio Analysis – Categories of Financial Ratios

There are numerous financial ratios that are used for ratio analysis, and they are grouped into the following categories:

1. Liquidity ratios

Liquidity ratios measure a company’s ability to meet its debt obligations using its current assets. When a company is experiencing financial difficulties and is unable to pay its debts, it can convert its assets into cash and use the money to settle any pending debts with more ease.

Some common liquidity ratios include the quick ratio , the cash ratio, and the current ratio. Liquidity ratios are used by banks, creditors, and suppliers to determine if a client has the ability to honor their financial obligations as they come due.

2. Solvency ratios

Solvency ratios measure a company’s long-term financial viability. These ratios compare the debt levels of a company to its assets, equity, or annual earnings.

Important solvency ratios include the debt to capital ratio, debt ratio, interest coverage ratio, and equity multiplier. Solvency ratios are mainly used by governments, banks, employees, and institutional investors.

3. Profitability Ratios

Profitability ratios measure a business’ ability to earn profits, relative to their associated expenses. Recording a higher profitability ratio than in the previous financial reporting period shows that the business is improving financially. A profitability ratio can also be compared to a similar firm’s ratio to determine how profitable the business is relative to its competitors.

Some examples of important profitability ratios include the return on equity ratio, return on assets, profit margin, gross margin, and return on capital employed .

4. Efficiency ratios

Efficiency ratios measure how well the business is using its assets and liabilities to generate sales and earn profits. They calculate the use of inventory, machinery utilization, turnover of liabilities, as well as the usage of equity. These ratios are important because, when there is an improvement in the efficiency ratios, the business stands to generate more revenues and profits.

Some of the important efficiency ratios include the asset turnover ratio , inventory turnover, payables turnover, working capital turnover, fixed asset turnover,  and receivables turnover ratio.

5. Coverage ratios

Coverage ratios measure a business’s ability to service its debts and other obligations. Analysts can use the coverage ratios across several reporting periods to draw a trend that predicts the company’s financial position in the future. A higher coverage ratio means that a business can service its debts and associated obligations with greater ease.

Key coverage ratios include the debt coverage ratio, interest coverage, fixed charge coverage, and EBIDTA coverage.

6. Market prospect ratios

Market prospect ratios help investors to predict how much they will earn from specific investments. The earnings can be in the form of higher stock value or future dividends. Investors can use current earnings and dividends to help determine the probable future stock price and the dividends they may expect to earn.

Key market prospect ratios include dividend yield, earnings per share, the price-to-earnings ratio , and the dividend payout ratio.

Thank you for reading CFI’s guide to Ratio Analysis. To keep learning and advancing your career, the following CFI resources will be helpful:

• Analysis of Financial Statements
• Current Ratio Formula
• Financial Analysis Ratios Glossary
• Limitations of Ratio Analysis
• See all accounting resources
• See all capital markets resources
• Share this article

Create a free account to unlock this Template

Access and download collection of free Templates to help power your productivity and performance.

Already have an account? Log in

Supercharge your skills with Premium Templates

Take your learning and productivity to the next level with our Premium Templates.

Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI's full course catalog and accredited Certification Programs.

Already have a Self-Study or Full-Immersion membership? Log in

Access Exclusive Templates

Gain unlimited access to more than 250 productivity Templates, CFI's full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.

Already have a Full-Immersion membership? Log in

Financial Tips, Guides & Know-Hows

Home > Finance > Financial Ratio Analysis: Definition, Types, Examples, And How To Use

Financial Ratio Analysis: Definition, Types, Examples, And How To Use

Published: November 24, 2023

Learn everything about financial ratio analysis in finance, including its definition, types, examples, and how to effectively use it to make informed decisions.

• Definition starting with F

(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more )

Unlocking the Power of Financial Ratio Analysis

Understanding the financial health of a company is essential for investors, creditors, and even business owners. Financial ratio analysis is a powerful tool that helps to assess a company’s performance and make informed decisions. In this article, we will dive deep into the world of financial ratio analysis, exploring its definition, types, examples, and how to use it effectively.

Key Takeaways:

• Financial ratio analysis is a powerful tool to assess a company’s performance and financial health.
• It helps investors, creditors, and business owners make informed decisions.

What is Financial Ratio Analysis?

Financial ratio analysis is a method of evaluating a company’s financial health and performance by analyzing its financial statements. By comparing different financial ratios, we can gain valuable insights into various aspects of a company’s operations, including profitability, liquidity, solvency, and efficiency.

Types of Financial Ratios

Financial ratios can be broadly classified into four main categories: liquidity ratios, solvency ratios, profitability ratios, and efficiency ratios. Let’s take a closer look at each of these categories:

• Liquidity Ratios: These ratios measure a company’s ability to meet short-term obligations and assess its financial stability. Examples include the current ratio and the quick ratio.
• Solvency Ratios: Solvency ratios evaluate a company’s ability to meet long-term debt obligations. The debt-to-equity ratio and the interest coverage ratio are common examples.
• Profitability Ratios: These ratios indicate a company’s ability to generate profits relative to its revenue, assets, and shareholders’ equity. Examples include the gross profit margin, net profit margin, and return on equity.
• Efficiency Ratios: Efficiency ratios measure how well a company utilizes its assets and resources to generate sales and profits. Examples include the asset turnover ratio and inventory turnover ratio.

Using Financial Ratio Analysis

Financial ratio analysis is a versatile tool that can be used in various scenarios. Some common applications include:

• Comparing Companies: Financial ratio analysis allows investors and creditors to compare the financial performance of different companies within the same industry. This helps in identifying strong performers and potential investment opportunities.
• Evaluating Trends: By analyzing financial ratios over multiple periods, we can identify trends and spot any positive or negative changes in a company’s financial performance. This information is valuable for making predictions and forecasting.
• Assessing Risk: Financial ratio analysis helps identify potential financial risks by highlighting areas of concern such as high debt levels, low liquidity, or inefficient asset utilization. This knowledge allows investors and creditors to make more informed decisions.
• Measuring Efficiency: Ratios like the inventory turnover ratio and the asset turnover ratio help businesses assess their operational efficiency and make necessary improvements to maximize profits.

Bringing It All Together

Financial ratio analysis is an invaluable tool for understanding a company’s financial health and making informed decisions. By analyzing liquidity, solvency, profitability, and efficiency ratios, investors, creditors, and business owners can gain valuable insights into a company’s performance, compare companies, evaluate trends, assess risk, and measure efficiency.

So, whether you are a seasoned investor looking for the next promising stock or a business owner planning for growth, financial ratio analysis is an essential skill that can guide you towards success.

Our Review on The Credit One Credit Card

20 Quick Tips To Saving Your Way To A Million Dollars

Montreal Carbon Pledge Definition

Accounting Ratio Definition And Different Types

Latest articles.

The Importance of Emergency Funds and How to Build Yours

Written By:

A Beginner’s Guide to Effective WhatsApp Marketing in 2024

Navigating Crypto Frontiers: Understanding Market Capitalization as the North Star

Financial Literacy Matters: Here’s How to Boost Yours

Unlocking Potential: How In-Person Tutoring Can Help Your Child Thrive

Related post.

By:  •  Finance

Please accept our Privacy Policy.

We uses cookies to improve your experience and to show you personalized ads. Please review our privacy policy by clicking here .

• https://livewell.com/finance/financial-ratio-analysis-definition-types-examples-and-how-to-use/

Home — Essay Samples — Life — Harmony — The Last Supper Ratio Analysis

The Last Supper Ratio Analysis

• Categories: Harmony

About this sample

Words: 611 |

Published: Jun 13, 2024

Words: 611 | Page: 1 | 4 min read

Table of contents

Introduction, body paragraph.

Cite this Essay

Let us write you an essay from scratch

• 450+ experts on 30 subjects ready to help
• Custom essay delivered in as few as 3 hours

Get high-quality help

Prof Ernest (PhD)

Verified writer

• Expert in: Life

+ 120 experts online

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy . We’ll occasionally send you promo and account related email

No need to pay just yet!

Related Essays

4 pages / 1813 words

2 pages / 817 words

1 pages / 392 words

8 pages / 3838 words

Remember! This is just a sample.

You can get your custom paper by one of our expert writers.

121 writers online

Still can’t find what you need?

Browse our vast selection of original essay samples, each expertly formatted and styled

Related Essays on Harmony

Assimilation is a complex and multifaceted process that plays a crucial role in shaping societies and individuals. It involves the integration of individuals or groups into a new culture and the adoption of its practices, [...]

Diversity is a hallmark of the modern world, with people from various backgrounds, cultures, and perspectives coming together in an interconnected global community. While this diversity brings richness and vibrancy to our [...]

Respect, a cornerstone of human interaction, is a fundamental virtue that underpins healthy relationships, societal cohesion, and the preservation of human dignity. In a world marked by diversity of cultures, beliefs, and [...]

Whether it be getting a cold or losing a loved one, suffering is something everyone will experience. Ironically, suffering is one of the main reasons we have happiness; although we suffer, eventually our pain will be resolved. [...]

In the “Narrative Desire” chapter of his larger work, Reading for Plot, author Peter Brooks discusses the different modes of desire that exist within a reader. He argues that these desires are the forces of momentum brought to a [...]

Happiness is a concept that exemplifies the American dream. People go to any means by which to obtain the many varied materials and issues that induce pleasures in each individual, this emotion remain the ultimate goal. John [...]

Related Topics

By clicking “Send”, you agree to our Terms of service and Privacy statement . We will occasionally send you account related emails.

Where do you want us to send this sample?

By clicking “Continue”, you agree to our terms of service and privacy policy.

Be careful. This essay is not unique

This essay was donated by a student and is likely to have been used and submitted before

Download this Sample

Free samples may contain mistakes and not unique parts

Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

Please check your inbox.

We can write you a custom essay that will follow your exact instructions and meet the deadlines. Let's fix your grades together!

Get Your Personalized Essay in 3 Hours or Less!

We use cookies to personalyze your web-site experience. By continuing we’ll assume you board with our cookie policy .

• Instructions Followed To The Letter
• Deadlines Met At Every Stage
• Unique And Plagiarism Free

24/7 writing help on your phone

To install StudyMoose App tap and then “Add to Home Screen”

Ratio and Financial Statement Analysis

Save to my list

Remove from my list

Ratio and Financial Statement Analysis. (2016, Jun 13). Retrieved from https://studymoose.com/ratio-and-financial-statement-analysis-essay

"Ratio and Financial Statement Analysis." StudyMoose , 13 Jun 2016, https://studymoose.com/ratio-and-financial-statement-analysis-essay

StudyMoose. (2016). Ratio and Financial Statement Analysis . [Online]. Available at: https://studymoose.com/ratio-and-financial-statement-analysis-essay [Accessed: 26 Aug. 2024]

"Ratio and Financial Statement Analysis." StudyMoose, Jun 13, 2016. Accessed August 26, 2024. https://studymoose.com/ratio-and-financial-statement-analysis-essay

"Ratio and Financial Statement Analysis," StudyMoose , 13-Jun-2016. [Online]. Available: https://studymoose.com/ratio-and-financial-statement-analysis-essay. [Accessed: 26-Aug-2024]

StudyMoose. (2016). Ratio and Financial Statement Analysis . [Online]. Available at: https://studymoose.com/ratio-and-financial-statement-analysis-essay [Accessed: 26-Aug-2024]

• Financial Ratio Analysis Pages: 3 (745 words)
• Financial Ratio: Detailed Analysis For Hup Seng Industries Pages: 9 (2589 words)
• Financial Analysis And Statement Analysis Pages: 3 (802 words)
• Ratio Analysis Memo Pages: 4 (1076 words)
• NoCarb Limited Ratio Analysis Pages: 3 (663 words)
• Limitations of Ratio Analysis for Cross-Sectional Comparisons Pages: 2 (352 words)
• Financial statement analysis and report Pages: 3 (893 words)
• Budgeting and Financial statement Analysis Pages: 4 (1005 words)
• BILABONG Australia - financial statement analysis assignment Pages: 13 (3607 words)
• Apple Inc: Analysis of Financial Statement Pages: 5 (1473 words)

👋 Hi! I’m your smart assistant Amy!

Don’t know where to start? Type your requirements and I’ll connect you to an academic expert within 3 minutes.

Reflection on Ratio Analysis and Analytical Techniques Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Financial statement analysis gives information that can be used to make decisions. Ratio analysis can be used to drill down into specific business measurements. Liquidity, leverage and profitability ratio are the three basic types of ratios (Johnson, 2017). The ability of a corporation to pay short-term debts is measured by liquidity ratios (LR). Current ratios are a specific example of an insightful LR. According to Johnson (2017), a company with a higher leverage ratio is better positioned to satisfy its debt commitments than one with a lower ratio. The organization may face insolvency if the CR is too low. However, there may be profit opportunities if the ratio is excessively high. As a result, LR is primarily utilized in managerial decision-making to determine a firm’s debt-paying ability and demonstrate risk lending.

Profitability ratios (PR) measure a company’s ability to generate profits and how those gains are distributed to shareholders. PR identifies which parts of company segments or processes are the most lucrative (Johnson, 2017). A specific example of PR is the gross profit margin utilized to assess the organization’s gains from its activities. PR is an excellent management decision-making tool since it assesses whether a firm produces more revenue than its expenditures. PR show how well a business generates income and value for its investors.

Leverage ratios (LR) reveal a business’s indebtedness or items acquired. While the liquidity ratio entails short-term debt, LR relates to long-term borrowing (Johnson, 2017). A specific example of LR is the debt ratio which shows a link between a firm’s liabilities and assets. Management can use LR to help guide their decision-making, particularly when comparing industry rivals and past data from the same organization. They can utilize the results of this benchmarking exercise to determine whether it is wise to invest in a given venture.

Various analytical approaches can be used by management to reach capital investment decisions. Generally, some of these include the net present value (NPV), payback method and internal rate of return (IRR). NPV is the present value of inflows minus the present value of outflows. The IRR is a discount rate that renders the NPV of all cash flows equal to zero when calculating the profitability of future investments. Finally, the payback method predicts the amount of time it will take to regain the initial expenditure.

One of the benefits of NPV is that it provides a thorough assessment of an investment’s profitability. Another advantage of NPV is that it considers both the dollar amount and the value created for the company (Woodruff, 2019). According to Woodruff (2019), NPV has many drawbacks, including the potential for future cash flow guesswork and the challenge of applying it when evaluating projects with different periods. Using NPV to evaluate an investment and how it will turn out is the gain or an example of how much value it can add to a firm.

IRR has the benefit of assisting in calculating the time value of money (TVM). Another merit of IRR is that it is simple to apply and comprehend (Lanctot, 2019). Disadvantages are that the evaluation is often performed without considering the project’s magnitude or future expenditures. Essentially, when used outside of proper contexts, it can be misread or misunderstood. An example of top advantage is that IRR encompasses future or upcoming periods when computing the TVM.

Finally, the payback method (PM) is another commonly used analytical approach. The simplicity of the PM, as well as the ability to compare multiple projects and identify the shortest period, are its advantages. However, the technique also has the disadvantage of overlooking a project’s profitability and return on investment. Essentially, it does not consider the TVM or upcoming cash flows from each expenditure after the payback period (Woodruff, 2018). The top benefit of PM is that it is an easy and quick procedure for reaching capital investment decisions.

Johnson, R. (2017). 3 types of ratios in accounting . Bizfluent. Web.

Lanctot, P. (2019). The advantages and disadvantages of the internal rate of return method . Small Business. Web.

Woodruff, J. (2018). Various capital budgeting methods . Small Business – Chron.com. Web.

Woodruff, J. (2019). Advantages & disadvantages of net present value in project selection . Small Business. Web.

• Accounting: General Journal and General Ledger
• Business Case Scenario: Missing Money in a Company
• The Dangers of Global Warming: Environmental and Economic Collapse
• The Net Present Value Method Analysis
• The Time Value of Money: Embedding Futurity in Urban Governance
• Sustainability and Creative Accounting
• Accounting Treatments Between Research and Expenditure
• Suggestions Meant to Improve Mike's Electricals from Activity-Based Management
• Managerial Accounting in Business
• Net Operating Loss Carryforward
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2023, September 30). Reflection on Ratio Analysis and Analytical Techniques. https://ivypanda.com/essays/reflection-on-ratio-analysis-and-analytical-techniques/

"Reflection on Ratio Analysis and Analytical Techniques." IvyPanda , 30 Sept. 2023, ivypanda.com/essays/reflection-on-ratio-analysis-and-analytical-techniques/.

IvyPanda . (2023) 'Reflection on Ratio Analysis and Analytical Techniques'. 30 September.

IvyPanda . 2023. "Reflection on Ratio Analysis and Analytical Techniques." September 30, 2023. https://ivypanda.com/essays/reflection-on-ratio-analysis-and-analytical-techniques/.

1. IvyPanda . "Reflection on Ratio Analysis and Analytical Techniques." September 30, 2023. https://ivypanda.com/essays/reflection-on-ratio-analysis-and-analytical-techniques/.

Bibliography

IvyPanda . "Reflection on Ratio Analysis and Analytical Techniques." September 30, 2023. https://ivypanda.com/essays/reflection-on-ratio-analysis-and-analytical-techniques/.

• Argumentative
• Ecocriticism
• Informative
• Explicatory
• Illustrative
• Problem Solution
• Interpretive
• Music Analysis
• All Essay Examples
• Entertainment
• Law, Crime & Punishment
• Artificial Intelligence
• Environment
• Geography & Travel
• Government & Politics
• Nursing & Health
• Information Science and Technology
• All Essay Topics

Ratio Analysis Report

Ratio analysis is a financial tool used to evaluate the financial performance of a company by analyzing the relationships between various financial variables in its financial statements. It helps in assessing the company's profitability, liquidity, solvency, and efficiency. By comparing different ratios over time or against industry benchmarks, investors, creditors, and management can make informed decisions about the company's financial health and performance.

One of the key ratios used in ratio analysis is the profitability ratio, which includes metrics such as return on assets (ROA), return on equity (ROE), and gross profit margin. ROA measures how efficiently a company is using its assets to generate profits, while ROE indicates the company's ability to generate profits from shareholders' equity. The gross profit margin, on the other hand, shows the percentage of revenue that exceeds the cost of goods sold, reflecting the company's pricing strategy and cost management.

Another important category of ratios is the liquidity ratio, which includes the current ratio and quick ratio. The current ratio measures the company's ability to pay off its short-term liabilities with its current assets, while the quick ratio provides a more stringent measure by excluding inventory from current assets. These ratios are crucial for assessing the company's short-term financial health and its ability to meet its obligations as they come due.

Furthermore, the solvency ratio, such as the debt-to-equity ratio and interest coverage ratio, helps in evaluating the company's long-term financial stability and its ability to meet long-term debt obligations. The debt-to-equity ratio indicates the proportion of debt used to finance the company's assets relative to shareholders' equity, while the interest coverage ratio measures the company's ability to cover its interest expenses with its operating income. These ratios are essential for creditors and investors to assess the company's risk profile and financial leverage.

In conclusion, ratio analysis is a powerful tool for evaluating a company's financial performance and making informed decisions about its future prospects. By analyzing profitability, liquidity, and solvency ratios, stakeholders can gain valuable insights into the company's financial health and identify areas for improvement. It is essential for investors, creditors, and management to regularly conduct ratio analysis to monitor the company's performance and make strategic decisions to drive its success in the long run.

Related Essays

• Woolworths Financial Ratio Report Analysis - Accounting Report
• Financial Ratio Analysis Report of Ford Motor Company
• Situation Analysis: Situation Analysis Report For Target Canada
• Ratio Analysis And Financial Analysis Of Microsoft Corporation
• Analysis Of The 2015 Annual Report Of Telstra

Report on Analysis of Next Plc

Next Plc, a prominent British multinational clothing, footwear, and home products retailer, has long been a subject of scrutiny and analysis within the financial sector. As of the latest available data, Next Plc continues to demonstrate resilience and adaptability in the face of various market challenges, positioning itself as a leader in the retail industry. This report aims to provide an in-depth analysis of Next Plc's financial performance, strategic initiatives, and competitive positioning. Firstly, it is imperative to examine Next Plc's financial performance over recent quarters. Despite the volatile economic landscape and the impact of the COVID-19 pandemic, Next Plc has managed to maintain a robust financial position. The company's revenue streams have shown consistent growth, driven by strong sales both in-store and online. Additionally, Next Plc's ability to effectively manage costs and optimize operational efficiency has contributed to its sustained profitability. Furthermore, Next Plc has strategically diversified its product offerings and expanded its market reach. By leveraging its strong brand reputation and customer loyalty, the company has successfully introduced new product lines and entered emerging markets. This strategic diversification not only mitigates risks associated with fluctuations in consumer preferences but also positions Next Plc for long-term growth and sustainability. In addition to its financial performance and strategic initiatives, Next Plc's competitive positioning warrants analysis. The company operates in a highly competitive retail landscape, facing competition from both traditional brick-and-mortar retailers and e-commerce giants. However, Next Plc has differentiated itself through its focus on quality, innovation, and customer experience. By continuously innovating its product offerings and investing in digital technology, Next Plc has effectively navigated the evolving retail landscape and maintained its competitive edge. In conclusion, the analysis of Next Plc reveals a company that remains resilient, adaptable, and strategically positioned for future growth. Despite facing challenges posed by economic uncertainties and changing consumer behavior, Next Plc continues to deliver strong financial performance, drive strategic initiatives, and differentiate itself in a competitive market. As such, Next Plc stands as a testament to effective management, innovation, and resilience in the retail industry....

• World leaders

Financial Report Analysis : Coca Cola And Pepsico

Financial Report Analysis of Coca-Cola and PepsiCo Coca-Cola and PepsiCo, two titans in the beverage industry, continually strive for market dominance and financial success. Analyzing their financial reports provides valuable insights into their performance, strategies, and potential future directions. **Financial Performance:** Both companies boast impressive financial performances, with Coca-Cola's annual revenue consistently surpassing $30 billion and PepsiCo's hovering around $70 billion. However, a deeper dive into their financial reports reveals nuances in their revenue sources and profitability. While Coca-Cola relies heavily on its core carbonated soft drinks, PepsiCo has diversified its portfolio with snacks and non-carbonated beverages. This diversification strategy has contributed to PepsiCo's slightly higher profitability margin compared to Coca-Cola. **Revenue Breakdown:** Examining the revenue breakdown of both companies unveils interesting trends. Coca-Cola generates the majority of its revenue from beverage sales, particularly carbonated soft drinks, followed by non-carbonated beverages. In contrast, PepsiCo derives a more balanced revenue stream from beverages and snacks. This diversification mitigates risks associated with fluctuations in consumer preferences and economic conditions. **Cost Structure and Efficiency:** Analyzing the cost structure and efficiency metrics provides insights into the operational effectiveness of Coca-Cola and PepsiCo. Both companies have extensive distribution networks, but PepsiCo's integration of its snack and beverage divisions offers cost-saving synergies. Additionally, Coca-Cola's recent investments in bottling operations aim to enhance efficiency and streamline production processes. Evaluating metrics such as operating margin and return on assets enables investors to gauge how efficiently each company utilizes its resources to generate profits. **Debt and Liquidity:** Assessing the debt levels and liquidity positions of Coca-Cola and PepsiCo is crucial for understanding their financial health and risk management strategies. Both companies maintain healthy balance sheets with manageable debt levels relative to their assets and cash flows. However, fluctuations in interest rates and currency exchange rates pose potential risks, especially for multinational corporations like Coca-Cola and PepsiCo. Monitoring metrics such as debt-to-equity ratio and current ratio provides insights into their ability to meet short-term obligations and fund future growth initiatives. **Conclusion:** In conclusion, analyzing the financial reports of Coca-Cola and PepsiCo offers valuable insights for investors, stakeholders, and industry observers. Despite facing challenges such as changing consumer preferences and economic uncertainties, both companies demonstrate resilience and adaptability through strategic diversification, operational efficiency, and prudent financial management. By delving into key metrics and trends, stakeholders can make informed decisions and assess the long-term sustainability of Coca-Cola and PepsiCo in the dynamic beverage market....

• Corporate Social Responsibility (CSR)
• Global Economy
• Income and Profit

Annual Report Analysis Pepsico 2014

Annual Report Analysis: PepsiCo 2014 PepsiCo, one of the leading global food and beverage companies, released its annual report for the year 2014, providing a comprehensive overview of its financial performance and strategic initiatives. The report highlighted the company's strong financial results, with net revenue increasing by 1% to $66.7 billion and core constant currency earnings per share growing by 9% to $4.63. PepsiCo's focus on innovation, brand building, and productivity initiatives has helped drive growth and deliver value to its shareholders. One of the key highlights of PepsiCo's annual report for 2014 was its strong performance in its global snacks division. The company's Frito-Lay North America segment delivered solid revenue growth, driven by successful product innovations and effective marketing campaigns. PepsiCo's international snacks business also performed well, with strong growth in emerging markets like China and India. The company's continued focus on expanding its snacks portfolio and leveraging its distribution network has helped drive growth in this important segment. In addition to its snacks business, PepsiCo's beverages division also showed positive results in 2014. The company's North America Beverages segment saw revenue growth, driven by successful product launches and effective pricing strategies. PepsiCo's international beverages business also performed well, with strong growth in key markets like Mexico and Brazil. The company's focus on innovation, marketing, and distribution has helped drive growth in its beverages division and strengthen its position in the global market. Overall, PepsiCo's annual report for 2014 reflects a company that is focused on driving growth, delivering value to its shareholders, and investing in its future. The company's strong financial performance, strategic initiatives, and focus on innovation position it well for continued success in the competitive food and beverage industry. As PepsiCo continues to expand its product portfolio, invest in its brands, and drive operational efficiencies, it is well-positioned to deliver sustainable growth and create long-term value for its stakeholders....

Financial Ratios Analysis and Comparison Paper

Financial ratios are vital tools used by investors, analysts, and managers to evaluate the performance and financial health of a company. These ratios provide valuable insights into various aspects of a company's operations, profitability, liquidity, and solvency. By comparing different financial ratios over time or against industry benchmarks, stakeholders can make informed decisions regarding investments, strategic planning, and risk management. One commonly used financial ratio is the liquidity ratio, which assesses a company's ability to meet its short-term obligations. The current ratio and the quick ratio are two key liquidity ratios. The current ratio measures the company's ability to pay off its short-term liabilities with its short-term assets, while the quick ratio provides a more stringent measure by excluding inventory from the calculation. A high current ratio indicates that the company has sufficient current assets to cover its current liabilities, whereas a low ratio may signal liquidity issues. Profitability ratios, on the other hand, evaluate a company's ability to generate profits relative to its revenue, assets, or equity. Common profitability ratios include the gross profit margin, net profit margin, return on assets (ROA), and return on equity (ROE). The gross profit margin measures the percentage of revenue retained after subtracting the cost of goods sold, while the net profit margin indicates the percentage of revenue remaining after all expenses, including taxes and interest, have been deducted. ROA and ROE assess the company's ability to generate profits relative to its total assets and shareholders' equity, respectively. Higher profitability ratios are generally preferred as they indicate efficient operations and strong financial performance. Furthermore, financial ratios also provide insights into a company's financial structure and leverage. The debt-to-equity ratio and the interest coverage ratio are commonly used to assess a company's solvency and financial risk. The debt-to-equity ratio compares a company's total debt to its shareholders' equity, reflecting the proportion of financing provided by creditors versus shareholders. A high debt-to-equity ratio may indicate that the company relies heavily on debt financing, which can increase financial risk and interest expenses. Conversely, a low ratio suggests a conservative capital structure with less reliance on debt. The interest coverage ratio measures the company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio indicates greater financial stability and the ability to comfortably cover interest expenses, whereas a lower ratio may raise concerns about the company's ability to service its debt obligations. In conclusion, financial ratios analysis and comparison play a crucial role in assessing a company's financial performance, strengths, and weaknesses. By examining various ratios related to liquidity, profitability, and solvency, stakeholders can gain valuable insights into a company's operational efficiency, financial health, and overall viability. Effective interpretation and comparison of financial ratios enable investors, analysts, and managers to make informed decisions, mitigate risks, and identify opportunities for growth and improvement....

Media Analysis Report On The Unemployment Of Bhp Billiton 's Job Cuts, Warns An Economist

Media Analysis Report on the Unemployment Crisis The issue of unemployment has garnered significant attention in the media in recent years, as it continues to affect millions of individuals worldwide. From news articles to opinion pieces, media outlets have been analyzing the root causes, implications, and potential solutions to this pressing societal problem. This media analysis report aims to delve into the portrayal of unemployment in various forms of media, examining the key themes, perspectives, and messages conveyed to the audience. One prominent theme that emerges from media coverage of unemployment is the economic impact on individuals and society as a whole. News reports often highlight statistics and data related to job losses, unemployment rates, and the ripple effects on industries and communities. By emphasizing the human stories behind these numbers, media outlets effectively draw attention to the hardships faced by those who are unemployed, including financial struggles, emotional stress, and the erosion of self-esteem. This portrayal serves to humanize the issue and generate empathy among readers and viewers. Another aspect frequently explored in media analysis of unemployment is the role of government policies and interventions. Opinion pieces and editorials often critique existing labor market policies, assess their effectiveness, and propose alternative approaches to addressing unemployment. Debates around topics such as minimum wage laws, unemployment benefits, and job creation initiatives are commonplace in the media, reflecting differing ideological viewpoints and political agendas. Through in-depth analysis and commentary, media outlets play a crucial role in shaping public discourse and influencing policy decisions related to unemployment. Moreover, media coverage of unemployment often extends beyond traditional news outlets to include social media platforms and online forums. Here, individuals share personal anecdotes, offer support and advice, and participate in broader conversations about the job market and employment prospects. Social media has become a vital space for networking, job hunting, and advocacy, empowering individuals to amplify their voices and mobilize for change. However, it also presents challenges, such as the spread of misinformation and the perpetuation of stereotypes about unemployment and the unemployed. In conclusion, media analysis of the unemployment crisis reveals a complex landscape shaped by multiple factors, including economic trends, government policies, and social dynamics. By examining the portrayal of unemployment in various forms of media, we gain insight into the prevailing narratives, attitudes, and debates surrounding this critical issue. Moving forward, it is essential for media outlets to continue providing accurate, balanced, and informative coverage of unemployment, while also amplifying the voices of those directly affected and advocating for meaningful solutions to address this societal challenge....

• Social Issues

Marketing Strategic Analysis Report on Intercontinental Hotel, Wellington, New Zealand

Intercontinental Hotel, a renowned name in the hospitality industry, has been a beacon of luxury and comfort for travelers worldwide. This report aims to provide a comprehensive analysis of the marketing strategies employed by Intercontinental Hotel to maintain its competitive edge in the market. Firstly, Intercontinental Hotel has capitalized on its brand image to attract discerning travelers. With a legacy of providing exceptional service and a commitment to excellence, the hotel chain has successfully positioned itself as a top choice for luxury accommodation. Through strategic branding initiatives and consistent delivery of superior guest experiences, Intercontinental Hotel has cultivated a loyal customer base. Secondly, the hotel chain has leveraged digital marketing channels to enhance its visibility and reach. In today's digital age, online presence is paramount, and Intercontinental Hotel has recognized this by investing in robust digital marketing campaigns. From social media engagement to search engine optimization, the brand ensures that it remains at the forefront of online consumer consciousness. Moreover, Intercontinental Hotel has implemented targeted marketing campaigns to cater to diverse market segments. By understanding the unique preferences and needs of different customer demographics, the hotel chain tailors its marketing efforts to effectively engage with various audiences. Whether it's offering exclusive packages for business travelers or curating bespoke experiences for luxury seekers, Intercontinental Hotel ensures that its marketing strategies resonate with its target markets. Furthermore, the hotel chain prioritizes sustainability and responsible tourism in its marketing endeavors. With an increasing emphasis on eco-conscious travel, Intercontinental Hotel has incorporated sustainability initiatives into its marketing messaging. From promoting eco-friendly practices within its properties to supporting local communities and conservation efforts, the brand showcases its commitment to environmental stewardship, appealing to socially conscious travelers. In conclusion, Intercontinental Hotel's marketing strategies encompass a blend of brand positioning, digital engagement, targeted campaigns, and sustainability initiatives. By staying true to its core values of excellence and innovation, the hotel chain continues to thrive in an ever-evolving market landscape. With a focus on delivering memorable guest experiences and embracing responsible business practices, Intercontinental Hotel remains a beacon of luxury hospitality globally....

Walmart Dividend Payout Ratio Analysis

Walmart, a leading multinational retail corporation, has consistently provided dividends to its shareholders, reflecting its financial health and commitment to returning value. The dividend payout ratio, a key financial metric, measures the proportion of earnings a company pays to its shareholders in the form of dividends. Analyzing Walmart's dividend payout ratio offers insights into its financial strategy, stability, and future growth prospects. Historically, Walmart has maintained a moderate dividend payout ratio, indicative of its balanced approach to managing capital. This strategy ensures that while shareholders receive a direct return on their investment through dividends, the company retains sufficient earnings for reinvestment and growth. Walmart's ability to sustain and gradually increase its dividends over the years speaks volumes about its operational efficiency, robust cash flow generation, and adept management of its extensive global operations. In evaluating Walmart's dividend payout ratio, it is essential to consider the company's broader financial context. Walmart operates in a highly competitive retail industry, where it must continually invest in technology, supply chain improvements, and customer experience enhancements to maintain its market leadership. The company's disciplined approach to capital allocation is evident in its strategic investments in e-commerce and international markets, even as it upholds a reliable dividend payout. Furthermore, Walmart's dividend policy is reflective of its financial stability. The company's consistent revenue growth, combined with effective cost management, has enabled it to generate healthy profits and strong free cash flows. These financial strengths underpin Walmart's capacity to provide dividends without compromising its strategic initiatives or financial flexibility. The dividend payout ratio, thus, serves as a testament to Walmart's prudent financial management and long-term strategic vision. In conclusion, Walmart's dividend payout ratio analysis reveals a company that adeptly balances shareholder returns with the need for reinvestment and growth. Walmart's approach underscores its commitment to financial discipline, operational excellence, and strategic foresight. As the retail landscape evolves, Walmart's ability to maintain a sensible dividend payout ratio while investing in future growth initiatives will be crucial to its continued success and attractiveness to investors....

Analysis Of Com 's ' Nyse : Crm ) Earnings Report Essay

Analysis of Salesforce's (NYSE: CRM) Earnings Salesforce, a prominent player in the software-as-a-service (SaaS) industry, has garnered significant attention from investors and analysts alike due to its consistent growth trajectory and innovative approach to customer relationship management (CRM). As we delve into an analysis of Salesforce's earnings, it becomes evident that several key factors contribute to its financial performance and market perception. One crucial aspect to consider is Salesforce's subscription-based revenue model, which forms the backbone of its earnings structure. Unlike traditional software companies that rely on one-time licensing fees, Salesforce generates recurring revenue through subscriptions, providing stability and predictability to its earnings stream. This model not only fosters long-term customer relationships but also ensures a steady influx of cash flow, bolstering investor confidence and valuation. Furthermore, Salesforce's relentless focus on product innovation and expansion into adjacent markets has fueled its revenue growth over the years. By continuously enhancing its CRM platform and introducing complementary services such as marketing automation and analytics, Salesforce has positioned itself as a comprehensive solution provider for businesses of all sizes. This diversification strategy not only broadens Salesforce's addressable market but also mitigates risk by reducing dependence on any single product or sector. Another factor contributing to Salesforce's earnings performance is its robust sales and marketing engine. With a global salesforce and extensive marketing initiatives, Salesforce effectively reaches and engages prospective customers, driving adoption and retention rates. Additionally, strategic partnerships and acquisitions have further accelerated Salesforce's market penetration and revenue growth, enhancing its competitive position in the rapidly evolving tech landscape. However, it's essential to acknowledge potential risks and challenges that could impact Salesforce's earnings outlook. Market saturation, increased competition, and macroeconomic uncertainties pose ongoing threats to Salesforce's growth trajectory. Additionally, concerns regarding data privacy and security could undermine customer trust and lead to regulatory scrutiny, potentially affecting Salesforce's bottom line. In conclusion, a comprehensive analysis of Salesforce's earnings reveals a company that thrives on innovation, customer-centricity, and strategic execution. Despite facing headwinds in a dynamic business environment, Salesforce's subscription-based revenue model, product diversification, and robust sales and marketing capabilities position it for continued success in the CRM space. As investors and stakeholders assess Salesforce's financial performance, a nuanced understanding of these factors is essential for informed decision-making and valuation....

Can't find the essay examples you need?

Use the search box below to find your desired essay examples.

Sample details

• Technology,
• Accounting,
• Words: 2362

Related Topics

• Credit Card
• Search Engine
• Mobile Phone
• Mobile technology
• Information Technology
• Interpersonal Communication
• Accountability
• Triple bottom line
• Information system
• Mass production
• Engineering

The Importance of Ratio

Ratio Analysis is a signifier of Financial Statement Analysis that is used to obtain a speedy indicant of a firm’s fiscal public presentation in several cardinal countries. The ratios are categorized as Short-run Solvency Ratios. Debt Management Ratios. Asset Management Ratios. Profitability Ratios. and Market Value Ratios. Ratio Analysis as a tool possesses several of import characteristics. The information. which are provided by fiscal statements. are readily available. The calculation of ratios facilitates the comparing of houses which differ in size. Ratios can be used to compare a firm’s fiscal public presentation with industry norms. In add-on. ratios can be used in a signifier of tendency analysis to place countries where public presentation has improved or deteriorated over clip. Because Ratio Analysis is based upon accounting information. its effectivity is limited by the deformations which arise in fiscal statements due to such things as Historical Cost Accounting and rising prices.

Therefore. Ratio Analysis should merely be used as a first measure in fiscal analysis. to obtain a speedy indicant of a firm’s public presentation and to place countries which need to be investigated farther. The pages below present the most widely used ratios in each of the classs given supra. Please maintain in head that there is non cosmopolitan understanding as to how many of these ratios should be calculated. You may happen that different books use somewhat different expressions for the calculation of many ratios. Therefore. if you are comparing a ratio that you calculated with a published ratio or an industry norm. do certain that you use the same expression as used in the computation of the published ratio. Short-run Solvency or Liquidity Ratios

ready to help you now

Without paying upfront

Short-run Solvency Ratios effort to mensurate the ability of a house to run into its short-run fiscal duties. In other words. these ratios seek to find the ability of a house to avoid fiscal hurt in the short-run. The two most of import Short-run Solvency Ratios are the Current Ratio and the Quick Ratio. ( Note: the Quick Ratio is besides known as the Acid-Test Ratio. ) Current Ratio

The Current Ratio is calculated by spliting Current Assets by Current Liabilities. Current Assets are the assets that the house expects to change over into hard currency in the approaching twelvemonth and Current Liabilities represent the liabilities which have to be paid in hard currency in the approaching twelvemonth. The appropriate value for this ratio depends on the features of the firm’s industry and the composing of its Current Assets. However. at a lower limit. the Current Ratio should be greater than one.

Top of FormExample ProblemsUse the information below to cipher the Current Ratio. Current Assets: $Current Liabilitiess: $Current Ratio:

Bottom of FormQuick RatioThe Quick Ratio recognizes that. for many houses. Inventories can be instead illiquid. If these Inventories had to be sold off in a haste to run into an duty the house might hold trouble in happening a purchaser and the stock list points would probably hold to be sold at a significant price reduction from their just market value. This ratio attempts to mensurate the ability of the house to run into its duties trusting entirely on its more liquid Current Asset histories such as Cash and Accounts Receivable. This ratio is calculated by spliting Current Assets less Inventories by Current Liabilities.

Top of FormExample ProblemsUse the information below to cipher the Quick Ratio.Current Assetss: $Inventory: $Current Liabilitiess: $Quick Ratio:

Bottom of Form

Debt Management Ratios

Debt Management Ratios effort to mensurate the firm’s usage of Financial Leverage and ability to avoid fiscal hurt in the long tally. These ratios are besides known as Long-run Solvency Ratios. Debt is called Fiscal Leverage because the usage of debt can better returns to shareholders in good old ages and increase their losingss in bad old ages. Debt by and large represents a fixed cost of funding to a house. Therefore. if the house can gain more on assets which are financed with debt than the cost of serving the debt so these extra net incomes will flux through to the shareholders. Furthermore. our revenue enhancement jurisprudence favours debt as a beginning of funding since involvement disbursal is revenue enhancement deductible. With the usage of debt besides comes the possibility of fiscal hurt and bankruptcy.

The sum of debt that a house can use is dictated to a great extent by the features of the firm’s industry. Firms which are in industries with volatile gross revenues and hard currency flows can non use debt to the same extent as houses in industries with stable gross revenues and hard currency flows. Therefore. the optimum mix of debt for a house involves a trade-off between the benefits of purchase and possibility of fiscal hurt. Debt Ratio. Debt-Equity Ratio. and Equity Multiplier

The Debt Ratio. Debt-Equity Ratio. and Equity Multiplier are basically three ways of looking at the same thing: the firm’s usage of debt to finance its assets. The Debt Ratio is calculated by spliting Entire Debt by Total Assets. The Debt-Equity Ratio is calculated by spliting Entire Debt by Total Owners’ Equity. The Equity Multiplier is calculated by spliting Entire Assetss by Entire Owners’ Equity.

Top of FormExample ProblemsUse the information below to cipher the Debt Ratio. Debt-Equity Ratio. and Equity Multiplier.Entire Assetss: $Entire Debt: $Entire Owners’ Equity: $Debt Ratio: %Debt-Equity Ratio:Equity Multiplier:

Bottom of FormAsset Management Ratios

Asset Management Ratios effort to mensurate the firm’s success in pull offing its assets to bring forth gross revenues. For illustration. these ratios can supply insight into the success of the firm’s recognition policy and stock list direction. These ratios are besides known as Activity or Employee turnover Ratios. Receivables Turnover and Days’ Receivables

The Receivables Turnover and Days’ Receivables Ratios assess the firm’s direction of its Histories Receivables and. therefore. its recognition policy. In general. the higher the Receivables Turnover Ratio the better since this implies that the house is roll uping on its histories receivables earlier. However. if the ratio is excessively high so the house may be offering excessively big of a price reduction for early payment or may hold excessively restrictive recognition footings. The Receivables Turnover Ratio is calculated by spliting Gross saless by Histories Receivables. ( Note: since Histories Receivables arise from Credit Gross saless it is more meaningful to utilize Credit Gross saless in the numerator if the information is available. )

The Days’ Receivables Ratio is calculated by spliting the figure of yearss in a twelvemonth. 365. by the Receivables Turnover Ratio. Therefore. the Days’ Receivables indicates how long. on norm. it takes for the house to roll up on its gross revenues to clients on recognition. This ratio is besides known as the Days’ Gross saless Outstanding ( DSO ) or Average Collection Period ( ACP ) .

Top of FormExample ProblemsUse the information below to cipher the Receivables Turnover and Days’ Receivables Ratios.Gross saless: $Histories Receivable: $Receivables Employee turnover:Days’ Receivables:

Bottom of FormInventory Turnover and Days’ InventoryThe Inventory Turnover and Days’ Inventory Ratios step the firm’s direction of its Inventory. In general. a higher Inventory Turnover Ratio is declarative of better public presentation since this indicates that the firm’s stock lists are being sold more rapidly. However. if the ratio is excessively high so the house may be losing gross revenues to rivals due to stock list deficits. The Inventory Turnover Ratio is calculated by spliting Cost of Goods Sold by Inventory. When comparing one firms’s Inventory Turnover ratio with that of another house it is of import to see the stock list rating methid used by the houses. Some houses use a FIFO ( first-in-first-out ) method. others use a LIFO ( last-in-first-out ) method. while still others use a leaden mean method.

The Days’ Inventory Ratio is calculated by spliting the figure of yearss in a twelvemonth. 365. by the Inventory Turnover Ratio. Therefore. the Days’ Inventory indicates how long. on norm. an stock list point sits on the shelf until it is sold.

Top of FormExample ProblemsUse the information below to cipher the Inventory Turnover and Days’ Inventory Ratios.Cost of Goods Sold: $Inventory: $Inventory Employee turnover:Days’ Inventory:

Bottom of FormSeasonal IndustriesMany houses. such as section shops. are in seaonal industries in which their assets. particularly current assets. and gross revenues volume vary throughout the twelvemonth. This can be of peculiar concern when comparing the Asset Management Ratios of one house with another house in the same industry. This occurs because. in the computation of each of the Asset Management Ratios. a figure from the Income Statement is divided by a figure from the Balance Sheet. The Income Statement studies grosss and disbursals over a period of clip ( normally a twelvemonth ) whereas the Balance Sheet reports the houses assets and liabilities on a peculiar day of the month. Thus. for houses in seasonal industries differences in public presentation may be detected when no existent difference exists merely because their Balance Sheets are published on different day of the months. Fixed Assets Turnover

The Fixed Assets Turnover Ratio measures how fruitfully the house is pull offing its Fixed Assets to bring forth Gross saless. This ratio is calculated by spliting Gross saless by Net Fixed Assets. When comparing Fixed Assets Turnover Ratios of different houses it is of import to maintain in head that the values for Net Fixed Assets reported on the firms’ Balance Sheets are book values which can be really different from market values.

Entire Assets TurnoverThe Total Assets Turnover Ratio measures how fruitfully the house is pull offing all of its assets to bring forth Gross saless. This ratio is calculated by spliting Gross saless by Entire Assets.

Top of FormExample ProblemsUse the information below to cipher the Fixed Assets Turnover and Total Assets Turnover Ratios.Gross saless: $Net Fixed Assets: $Entire Assetss: $Fixed Assets Turnover:Entire Assets Employee turnover:

Profitability Ratios

Profitability Ratios effort to mensurate the firm’s success in bring forthing income. These ratios reflect the combined effects of the firm’s plus and debt direction. Net income Margin

The Profit Margin indicates the dollars in income that the house earns on each dollar of gross revenues. This ratio is calculated by spliting Net Income by Gross saless.

Tax return on Assetss ( ROA ) and Return on Equity ( ROE )The Return on Assets Ratio indicates the dollars in income earned by the house on its assets and the Return on Equity Ratio indicates the dollars of income earned by the house on its shareholders’ equity. It is of import to retrieve that these ratios are based on accounting book values and non on market values. Therefore. it is non appropriate to compare these ratios with market rates of return such as the involvement rate on Treasury bonds or the return earned on an investing in a stock.

Top of FormExample ProblemsUse the information below to cipher the Net income Margin. Return on Assetss ( ROA ) . and Return on Equity ( ROE ) .Gross saless: $Net Income: $Entire Assetss: $Entire Owners’ Equity: $Net income Margin: %Tax return on Assetss: %Tax return on Equity: %

Market Value Ratios

Market Value Ratios relate an discernible market value. the stock monetary value. to book values obtained from the firm’s fiscal statements. Price-Earnings Ratio ( P/E Ratio )

The Price-Earnings Ratio is calculated by spliting the current market monetary value per portion of the stock by net incomes per portion ( EPS ) . ( Net incomes per portion are calculated by spliting net income by the figure of portions outstanding. ) The P/E Ratio indicates how much investors are willing to pay per dollar of current net incomes. As such. high P/E Ratios are associated with growing stocks. ( Investors who are willing to pay a high monetary value for a dollar of current net incomes evidently expect high net incomes in the future. ) In this mode. the P/E Ratio besides indicates how expensive a peculiar stock is. This ratio is non meaningful. nevertheless. if the house has really small or negative net incomes.

Market-to-Book RatioThe Market-to-Book Ratio relates the firm’s market value per portion to its book value per portion. Since a firm’s book value reflects historical cost accounting. this ratio indicates management’s success in making value for its shareholders. This ratio is used by “value-based investors” to assist to place undervalued stocks.

Top of FormExample ProblemsUse the information below to cipher the Price-Earnings Ratio and Market-to-Book Ratio.Net Income: $Entire Owners’ Equity: $Stock Price: $Number of Shares Outstanding:Price-Earnings Ratio:Net incomes per Share: $Market-to-Book Ratio:Book Value per Share: $

Ratio Equations

Short-run Solvency RatiosCurrent Ratio:Quick Ratio:Asset Management RatiosReceivables Employee turnover:Days’ Receivables:Inventory Employee turnover:Days’ Inventory:Fixed Assets Turnover:

Entire Assets Employee turnover:Debt Management RatiosTimess Interest Earned( TIE ) Ratio:Debt Ratio:Debt-Equity Ratio:Equity Multiplier:Profitability RatioNet income Margin:Tax return on Assetss:

Tax return on Equity:Market Value RatiosPrice/Earnings Ratios:Market-to-Book Ratio:Dividend Ratios

Payout Ratio:Retention Ratio:Other EquationsNet incomes Per Share:Book Value Per Share:

Ratio Analysis ExerciseThis exercising demonstrates the analysis of fiscal statements utilizing Ratio Analysis. Click the “New Problem” button to bring forth a new job. Calculate each of the ratios indicated below. Then click the “Show Answer” button to see the solution. The worksheet besides functions as a reckoner. You can come in your ain information into the Fieldss and so snap the buttons to see the solutions. Top of Form

Balance Sheet ( $ in Millions )Assetss 1998 Liabilitiess and Owners’ Equity 1998Current Assets Current LiabilitiessCash Histories CollectibleHistories Receivable Notes CollectibleInventory Total Current LiabilitiesEntire Current Assets Long-Term LiabilitiessLong-run DebtFixed Assets Total Long-run Liabilitiess

Property. Plant. and Equipment Owners’ EquityLess Accumulated Depreciation Common Stock ( $ 1 Par ) Net Fixed Assests Capital SurplusRetained Net incomesEntire Owners’ EquityEntire Assets Total Liab. and Owners’ EquityIncome Statement ( $ in Millions )1998Gross salessCost of Goods SoldAdministrative ExpensesDepreciation

Net incomes Before Interest and TaxesInterest ExpenseTaxable IncomeTaxsNet IncomeDividendsAddition to Retained Net incomesOther InformationNumber of Shares Outstanding ( Milions )Monetary value per Share

Calculate the undermentioned ratios:Current Ratio Times Interest Earned Return on Equity ( ROE ) Quick Ratio Debt Ratio Payout and Retention Ratios Receivables Turnover and Days’ Receivables Debt to Equity Ratio Price/Earnings Ratio Inventory Turnover and Days’ Inventory Equity Multiplier Market-to-Book Ratio Fixed Assets Turnover Profit Margin EPS and Book Value Per Share Total Assets Turnover Return on Assets ( ROA )

Cite this page

https://graduateway.com/ratio-analysis-essay-sample-essay/

You can get a custom paper by one of our expert writers

• Accounts receivable
• Enron Scandal
• Digital Technology

Check more samples on your topics

The benefits of lower student-teacher ratio in classrooms.

Introduction             One of the key issues that the government is looking into is the decrease of the quality of education received by Americans in pre-school, elementary and secondary.  The rise in academic achievement gap between Caucasians and members of the minority groups such as Hispanics and African-Americans further alarmed the government to take into action

Limtations of Ratio Analysis

Analysts should be aware of several important limitations regarding financial ratios. Firstly, it can be difficult to find meaningful industry-average ratios for large companies that operate divisions in different industries. Secondly, inflation can have a significant impact on a company's balance sheet and profits, leading to distortion. Therefore, when conducting ratio analysis for a single

Ratio Analysis On Xerox Financial Statements Accounting

This instance survey will execute ratio analysis on Xerox fiscal statements, highlight hearers ' duty for observing fraud and mistakes, place factors present at Xerox that were declarative of frauds being, and how could accounting houses guarantee that hearers do non subordinate their judgements to client penchants on other audit battle, and in conclusion bespeaking

Ratio Analysis of Olympic Industries Ltd

COMPANY PROFILE Olympic Industries Limited is one of the longest running and most reputed manufacturing-based companies in Bangladesh, with a heritage of over 50 years and group profile including interests in Pharmaceuticals, Power, and Information Technology, among other FMCG. It began in June 1979 as Bengal Carbide Limited, starting battery production in April 1982. The success

Four-Firm Concentration Ratio and Kinds of Market Forms

Perfect competition

The concentration ratio, in economics, is simply defined as the percentage size of the total market sales of a firm or a number of firms in relation to the whole industry. Concentration ratio or CR also helps in determining determine the relative size of a single firm as well as the determination of the kind

American Airlines Financial Ratio

Airline Industry

American Airlines, Inc., founded in 1934, is the primary subsidiary of AMR Corporation. The company provides aircraft services to around 160 destinations globally. It has partnerships with three regional carriers: American Eagle and Executive Airlines (both owned by AMR) and Republic Airways Holdings (owned by a non-AMR affiliated third party). These regional carriers play a

Megna Petrolium and Jumuna Oil Company Ratio Analysis

OBJECTIVE OF THE PROJECT The purpose and objectives of this project is to fully analyze the financial data of the two companies: Meghna Petroleum Limited (Main Company) and Jamuna Oil Company. (Competitor). In addition, to calculate their Liquidity, Asset management, Debt, profitability, and market value ratio and compare the two companies by explaining the implications

Patton-Fuller Ratio Computation Sample

This paper will turn to the ratio calculations to Patton-Fuller Community Hospital taken from Audited and Unaudited Reports from 2008-2009. From 2008-2009 the bing assets reduced. but showed a growing in the hospital’s duties. The infirmary is soon doing equal gross to cover the debts. which equals to no net income. Revenue demands to lift

Ratio Analysis of Wal Mart

Contents Larsen & Toubro Limited (L&T) Read the annual report of one of the Sensex Companies and prepare a note covering the following topics: Brief History Shareholding Pattern Promoters Contents of Annual Report Brief History The evolution of L&T into the country's largest engineering and construction organization is among the most remarkable success stories in

Hi, my name is Amy 👋

In case you can't find a relevant example, our professional writers are ready to help you write a unique paper. Just talk to our smart assistant Amy and she'll connect you with the best match.

Ratios Analysis Essays

Financial performance analysis of boohoo.com using the core framework, popular essay topics.

• American Dream
• Artificial Intelligence
• Black Lives Matter
• Bullying Essay
• Career Goals Essay
• Causes of the Civil War
• Child Abusing
• Civil Rights Movement
• Community Service
• Cultural Identity
• Cyber Bullying
• Death Penalty
• Depression Essay
• Domestic Violence
• Freedom of Speech
• Global Warming
• Gun Control
• Human Trafficking
• I Believe Essay
• Immigration
• Importance of Education
• Israel and Palestine Conflict
• Leadership Essay
• Legalizing Marijuanas
• Mental Health
• National Honor Society
• Police Brutality
• Pollution Essay
• Racism Essay
• Romeo and Juliet
• Same Sex Marriages
• Social Media
• The Great Gatsby
• The Yellow Wallpaper
• Time Management
• To Kill a Mockingbird
• Violent Video Games
• What Makes You Unique
• Why I Want to Be a Nurse
• Send us an e-mail