RATIO ANALYSIS

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RATIO ANALYSIS ASSIGNMENT
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• The stakeholders of a company (Shareholders,
  Creditors, Management, etc.) wants to know the
  financial health of the company for different
  reasons. Ratio analysis is the toll used by all
  of these in various different ways.
• There are different types of ratios which
  serves the purpose of checking the financial
  health of the company for the stakeholders. It is
  one of the widely used tools of financial
  analysis.

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• The below mentioned types of ratios gives the
  overview of what aspect of the performance it
  measures and to whom it is useful
• Profitability Ratios To measure the
  profitability of a company, these ratios are used
  by all the stakeholders. Net profit margin and
  Gross profit margin are the examples of
  profitability ratios.

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• Long Term Liquidity To measure the long term
  sustainability of the company, these ratios are
  used by the long term investors and management of
  the company. Debt-Equity ratio and Debt-Assets
  ratio are the examples of long term liquidity
  ratios.
• Short Term Liquidity Ratios To measure the short
  term liquidity of a company, these ratios are
  used by creditors and management of the company.
  Current Ratio, Quick Ratio (Acid-test Ratio) and
  Cash Ratio are the examples of short term
  liquidity ratios.

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• Management Efficiency Ratios To measure the
  efficiency of the management, these ratios are
  used by all the stakeholders. Inventory turnover,
  Receivables turnover and Payables turnover are
  the examples of management efficiency ratios.

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• Return on Investment Ratios To measure the
  return on investment of a company, these ratios
  are used by the investors of the company. Return
  on Equity (ROE), Return on Assets (ROA) and
  Return on Capital Employed (ROCE) are the
  examples of return on investment ratios.
• Market Ratios To analyse and forecast the market
  price of a company, these ratios are used by all
  the stakeholders. P/E Ratio, Dividend Yield,
  Payout Ratio and Price to Book Value Ratio are
  the examples of Market Ratios.

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• Ratio analysis is widely used and one of the
  basic tool for analyzing the performance of a
  company. However, it is only useful when combined
  with other tools or comparison of ratios with the
  competitors of a company.
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