FINANCIAL RATIO ANALYSIS

It gives me a great pleasure and satisfaction to present this book “Financial Ratio Analysis”. This book is new version of my old book “Financial Ratio Analysis”. The book will explain the need, purpose, and usefulness of Ratio analysis. I have explained almost all ratios based on latest financial statements of a leading manufacturing company for the financial year ended December 2019. Ratio wise hyperlink will help the reader to go quickly to the desired ratio. The main features of the book are simple understanding and key concepts. This book is useful to everyone in financial accounting field like students, Accounts executives, Financial analysts, etc. I hope that the book will help the readers to study in a focused manner. Any criticism and constructive suggestion in the direction of making the book a better teaching and studying manual will be gratefully acknowledged by the author. Suggestions will be incorporated in the subsequent editions.

All the best …

CONTENTS

 

A. INTRODUCTION TO FINANCIAL ANALYSIS

 

B. RATIO ANALYSIS

      Meaning of Ratio

      Advantages of Ratios

      Disadvantages of Ratios

 

C. Classification of Ratios

 

I . Balance Sheet Ratios

1.       Current Ratio

2.       Quick (Liquid) Ratio

3.       Cash (Absolute liquid) Ratio

4.       Interval Measure Ratio

5.       Networking Capital Ratio

6.       Debt Ratio

7.       Debt equity Ratio

8.       CAPITAL EMPLOYED TO NET WORTH RATIO

9.       ProprietAry Ratio

10.    ASSETS TO NET WORTH RATIO

11.    Capital Gearing Ratio

 

II . Profit and Loss Account Ratios

1.       INTEREST COVERAGE RATIO

2.       DEBT SERVICE COVERAGE RATIO

3.       GROSS PROFIT RATIO

4.       NET PROFIT RATIO

5.       OPERATING COST RATIO

6.       EXPENSE RATIO

7.       OPERATING PROFIT RATIO

8.       MATERIAL CONSUMED RATIO

9.       MANUFACTURING EXPENSES RATIO

10.    FINANCIAL LEVERAGE RATIO

11.    OPERATING LEVERAGE RATIO

12.    PREFERENCE DIVIDEND COVERAGE RATIO

13.    EQUITY DIVIDEND COVERAGE RATIO

 

III. Mixed or Combined Ratios

1.       INVENTORY TURNOVER RATIO

2.       DEBTORS TURNOVER RATIO

3.       CREDITORS TURNOVER RATIO

4.       NET ASSETS TURNOVER RATIO

5.       TOTAL ASSETS TURNOVER RATIO

6.       FIXED ASSETS TURNOVER RATIO

7.       CURRENT ASSETS TURNOVER RATIO

8.       WORKING CAPITAL TURNOVER RATIO

9.       RETURN ON CAPITAL EMPLOYED (ROCE)

10.    RETURN ON INVESTMENT (ROI)

11.    RETURN ON EQUITY (ROE)

12.    RETURN ON PROPRIETOR’S FUND

13.    RETURN ON TOTAL ASSETS

14.    EPS & DILUTED EPS

15.    DPS (DIVIDEND PER SHARE)

16.    PAYOUT RATIO

17.    DIVIDEND YIELD (MARKET YIELD) RATIO

18.    EARNINGS YIELD RATIO

19.    PRICE-EARNINGS RATIO

20.    MARKET VALUE TO BOOK BALUE RATIO

21.    CAPITAL TURNOVER RATIO

 

D . ANNEXURE