Information on the ratio analysis

[Esmel]

I have done my management studies on the financial management and working with a multinational firm as finance manager and need information on the ratio analysis. As my course suggest that financial management involve in development for the opportunity of a person or a business project to make sure an optimistic currency flow. It comprises the management and protection of financial assets. So please can anybody give me information about the Ratio analysis so that I will be able to get prepare presentation on ratio analysis. Please help me if possible please reply soon as it is very needful to me.

[G-MAT]

Ratio analysis is very important for an organization to get the performance and turnover of the organization. For preparation of the presentation on the Ratio analysis you have to know about the Ratio analysis. Ratio analysis is tool which is widely used for the financial analysis. We can define it as the methodical utilization of the ratio to understand the financial declaration so that we can scrutinize the failing and the strength of the firm as well as its past presentation and its present financial circumstances can be resolute. As it has the term Ratio is refers as the arithmetical and quantitative relationship among the two variables.

[Job-finder]

A financial ratio is a virtual magnitude of two chosen arithmetical values in use from an enterprise's economic statements. Frequently used in secretarial, there are a lot of normal ratios used to attempt to calculate the overall financial situation of a corporation or other association. Financial ratios might be used by manager inside a firm, by present and probable owners of a firm, and by a firm's creditors. Security analysts utilize economic ratios to contrast the power and limitation in a variety of companies. If share in a company are operated in a economic market, the market cost of the shares is utilized in convinced financial ratios. Economic (financial) ratios are classify according to the economic feature of the business which the ratio measures. They are as follows:

• Liquidity ratios: - It is defined as to calculate the accessibility of currency to pay balance.
• Activity ratios: It can be defined as how rapidly a firm changes non-cash property to cash property.
• Debt ratios: It is the ratio used to calculate the firm's capability to pay back long-term balance.
• Profitability ratios:- used to compute the firm's utilize of its resources and power of its operating cost to produce a satisfactory rate of come back.
• Market ratios: - It is used to calculate the shareholder reaction to owning a company's store and also the price of issuing supply.

[Engg.]

Ratio analysis is the method through which you can find the performance and the financial situation of the organization it give the strength and the weakness of the firm. There are many significance of the ratio analysis.
To get the firma performance:
By means of the Ratio analysis you can get the conclusion regarding many aspects which may be financial health, Profitability and operational efficiency of the organization.

1. It helps you to get the inter-firm comparison:
   Ratio analysis helps you to get the interim comparison of any firm by means of giving the necessary information. An inter-firm comparison gives the situation of the firm in the competition arena. It also gives the information and the relative data for the comparison of the performance of the firm in different department.
2. Ratio analysis helps us to determine the financial position of the firm in the market:
   It helps the firm to get the condition of inter-firm whether it is rising or we can say it is improving in the financial position or deteriorating or it is constant from many years. After getting the performance ratio using ratio analysis we can make ready to the management department of the firm in the task of planning, forecasting and controlling.

[Masters]

Ratio analysis are classified into many parts they are as follows:
Liquidity ratio: it is used to calculate the firms current obligations and this is further classified into two in this we use ratios like current ratiowhich we can fined by using the formula current assets equals to the comparison of the current ratio to the current liabilities and the other one is acid test ratio which can be find by using this formula acid test =current asset inventories/current liabilities
Leverage structure ratio: It gives you the relative interest of the owner and the creditors in the firm it also can be finding using two types of the ratio formula which are as follows:
Debt-equity ratio=long-term +short term + current liabilities/net worth and the other formula is
Total debt ratio= long term+ short term borrowing + current liabilities/capital employed
Profitability ratio: It is the best ratio of the firms overall efficiency of the business concern because they comprise between the return of the capital to the capital put into the business. It can be determined on the basis of the sales and the investment
This ratio related to the sale is gross profit to the sales ratio and can be find using the formula
Gross profit to sale ratio= sales cost of goods sold/sale*100
Net profit margin which can be find using the formula
net profit margin=net profit after tax and interest/sales*100
Now the ratio related to the investments are return to the assets which can be find using the formula return to the assets=net profit after tax/fixed assets
Return to the capital employed=net profit after taxes/total capital employed