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uses and application of ratiosratios are required in the following ways via managers in different firms1 evaluating the efficiency of assets
book value and market to book value per sharebook value per share bvps net worth equityno of ordinary shares it is called also liquidity ratio
dividend payout ratiodividend payout ratio dpseps x
dividend cover ratiodividend cover eps dps earning to ordinary sharesdividend paid this signifies the number of times
price earnings ratioprice earnings pe or ratio market price per share mpsearnings per
growth and valuation ratiothis ratio indicates the growth potential of the firm in addition to determining the value of the firm and investment made
profitability in relation to investment - profitability ratioa return on investment roi or return on total asset rota net profit total asset x 100the
profitability ratiothese ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from
leverage or gearing ratiosleverage or gearing ratios are as followa debt ratio total debtstotal assetswhereas total debt fixed charge capital
capital structure ratiogearingleveragecapital structure ratio the ratio signifies the extent whether the firm has borrowed fixed charge capital to
important points for working capital cyclea lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover
fixed asset and total asset turnover ratiofixed asset turnover annual sales fixed assets this ratio indicate the efficiency along with which the
creditors payment period ratiocreditors payment period 365 creditors
accounts payable turnover ratioratio for account payable turnover is as followcreditorsaccounts payable turnover annual credit purchases average
debtors collection period - formulafomula is given belowdebtors collection period 365 debtors turnoveror 365 x average debtors annual credit
debtors or accounts receiver turnoverformula is as followdebtorsaccounts receiver turnover annual credit salesaverage debtorthe ratio signify
turnover ratiosturnover ratiosefficiencyasset management ratioturnover ratio shows the efficiency along with that the firm utilized the asset or
liquidity ratios - ratio analysisit also identified as working capital ratios they show capability of the firm to meet its short term maturing
yard stick required in ratio analysis1 past performance of the companythe companys previous performance past ratio is needed to gauge or measure the
competitors and general public - measuring business performancecompetitors these are interested in the companys presentation from the market share
government - measuring business performancegovernmentthe government is interested particularly in utility companies as kplc kptc and such will offers
potential investors - measuring business performancepotential investorsthese parties are interested in a company in total both on long and short term
management of company and directorsthey will consequently be interest in asa in generating profits efficiency of the companyb the companys capability
long term lenders - measuring business performancelong term lendersthese involve finances with loans mortgages and debenture holders these have