THIS SLIDES CONTAIN VARIOUSTYPES OF RATIO ANALYSYIS,OBJECTIVES AND A COMPANY BALANCESHEET FOR CLASS XI, XII, B.COM , BBA AND MBA. THIS SLIDES CAN BE FRUITFUL FOR BETTER UNDERSTANDING OF RATIO ANALYSIS. IF YOU LIKE THIS SLIDES SHARE WITH YOUR FRIENDS AND FAMILY MEMBERS .
3. RATIO ANALYSIS
• An study of financial statements with the help of ‘accounting ratio’ is termed as Ratio
analysis.
• “Ratio Analysis is a study of relationship among various financial factors in a
. -Myers
• Ratio analysis serves the purpose of various users who are interested in the financial
statements. It simplifies, summarises and systematises the figures in the financial
statement.
4. OBJECTIVES OF RATIOANALYSIS
1.To simplify the accounting information.
2.To determine liquidity of the business.
3.To assess the operating efficiency of the
business.
4.To analyse the profitability of the business.
5.To help in comparative analysis, i.e., inter-firm
and intra-firm
5.
6. LIQUIDITY RATIO
• Liquidity ratios are a measure of the ability of a company to pay off its short-term
liabilities. Liquidity ratios determine how quickly a company can convert the assets
and use them for meeting the dues that arise. The higher the ratio, the easier is the
ability to clear the debts and avoid defaulting on payments.
1
.
2.
7. LEVERAGE / SOLVENCY RATIO
• Solvency refers to the capacity of the business to pay its long term liability as and when it
becomes due. So, The Solvency Ratios are used to know the company's capacity to pay
its short & long term liabilities.
Debt to
Equity Ratio
Total Assets to
Debt Ratio
Proprietary
Ratio
Interest
coverage
RATIO
Solvency
Ratio
8. 1. Debt to Equity Ratio
The Debt to Equity ratio is used to compare the Equity (i.e. shareholder’s funds) with
debts (i.e. outsider’s liabilities) of the business.
FORMULA:-
2. Total Assets to Debt Ratio
Total Assets to Debt Ratio is the ratio, through which the total assets of a company are
expressed in relation to its long-term debts. It is a variation of the debt-equity ratio and
gives the same indication as the debt-equity ratio.
FORMULA:-
Total
assets to
Debt
ratio
= TOTAL ASSETS
DEBT
9. 3. Proprietary Ratio
Proprietary ratio is a type of solvency ratio that is useful for determining the amount or
contribution of shareholders or proprietors towards the total assets of the business. It
is also known as equity ratio or shareholder equity ratio or net worth ratio.
FORMULA:-
4. Interest coverage RATIO
The interest coverage ratio is a debt and profitability ratio used to determine how
easily a company can pay interest on its outstanding debt.
FORMULA:-
11. PROFATABILITY RATIO
• Profitability ratios assess a company's ability to earn profits from its
sales or operations, balance sheet assets, or shareholders' equity.
Profitability ratios indicate how efficiently a company generates
profit and value for shareholders.
GROSS
PROFIT
RATIO
OPERATING
PROFOIT
RATIO
NET PROFIT
RATIO
RETURN ON
ASSETS
RETURN ON
EQUITY
TYPESOF PROFITABILITY RATIO
