Examples Of Ratio Analysis Financial Analysis

Asset (or capital) turnover ratio measures how many times the capital employed was turned over during the year to achieve the revenue which fact indicates the efficiency of the company’s deployment of its assets. The above tables show that even though the two companies surpass the rank of one hundred percent which means that their capital employed was

In 2009 the company ratio was 1.02 and climbed up to 1.03. This means that the company will take up their profits in future of which is a good sign.

I. Rate of Return on Total Assets: Measures the company’s profitability relative to total assets. A percentage increment for Company G, from 12.30% to 13.68% (2011-12) keeps them above industry benchmarks (8.60% and 12.30%). Rate of Return on Total Assets represents strength for Company G.

this ration is: Rate of Return on Net Sales equals Net Income divided by Net Sales. A high or

Current Ratio: Current ratio helps the company assess its ability to use assets like cash, accounts receivable, inventory and the ability to pay short term liabilities as the accounts payable and wages. The ratio can be found by dividing the current assets /the current liabilities. Year 12 shows a ratio of 1.78 with year 11 a ratio of 1.86. Year 12 is down from year 11. The industry is 2.1 so year 12 has declined from the previous year and is near the lower quartile which means there is a weakness. There is a showing of declining trending.

Roce could further be analyzed through two main ratios which are operating margin and asset turnover.

Profitability ratios show us whether the companies has the ability to generate profits from its operations. These ratios are important to the company as well as its investors. Profitability ratios let us know the overall performance and efficiency of the company. This includes

Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas. Financial ratios are important because they help investors make decisions to buy hold or sell securities.

Ratio analysis is a tool brought by individuals used to evaluate analysis of information in the financial statements of a business. The ratio analysis forms an essential part of the financial analysis which is a vital part in the business planning. There are 3 different ways of assessing businesses performance and these are: solvency, profitability and performance. Ratio analysis assists managers to work out the production of the company by figuring the profitability ratios. Also, the management can evaluate their revenues to check if their productivity. Thus, probability ratios are helpful to the company in evaluating its performance based on current earning. By measuring the solvency ratio, the companies are able to keep an

There is a essential use and limitations of financial ratio analysis, One must keep in mind the following issues when using financial ratios: One of the most important reasons for using financial ratio analysis is comparability and for this, a reference point is required. Usually, financial ratios are compared to historical ratios of the business itself, competitor’s financial ratios or the overall ratios of the industry in question. Performance may be adjudged as against organizational goals or forecasts. A number of ratios must be analyzed together to get a true and reliable picture of the financial performance of the business. Relying on each ratio

The paper illustrates that financial ratio analysis is an important tool for firm’s to evaluate their financial health in order to identify areas of weakness so as to institute corrective measures.

Ratio analysis will be used to measure the profitability, liquidity and efficiency of the named business and to analyse the performance of the business using ratio analysis.

Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor

The financial data of company does not tell us the entire position of an organisation and its performance over the year or certain period of time for comparative purposes. Therefore, the use of ratios

Ratio analysis is the fundamental indicator of company’s performances for so many years; it is also can be seen as the very first step to measure a company’s performance along with its financial position. Moreover, ratio analysis has been researched and developed for many years, Bliss had presented the first coherent system of ratios, and he also stated that ratios are “indicator of the status of fundamental relationship within the business” Horrigan (1968). However there are some arguments on whether the ratio analysis is useful or not since to conduct these analyses will be costly to the company, also there are several limitations on how these ratios work. Therefore, the usefulness and the limitation of ratio analysis will be discussed further in this essay, with the use of easyJet’s annual report as examples.