Unique Most Used Financial Ratios
Iv They also point out problem and weak.
Most used financial ratios. In the same way if an individual wants to evaluate hisher personal financial situation based on the financial statements considering the net worth or cash flow or. This ratio indicates the proportion of equity and debt used by the company to finance its assets. Capability to fulfill obligations in the short term.
Measure a companys profit concerning its assets. Long term level of debt used to generate profit. It measures investors expectations and market appraisal of the performance of a firm.
Ii They also help a business to compare the financial results to those of competitors. Ratios are easy to understand and simple to compute. Iii Ratios assist the management in decision making.
Price to Earnings Ratio PE 2. Some of these ratios include earnings ratio asset turnover ratio inventory turnover ratio working capital ratio interest coverage ratio peg ratio growth ratio accounts receivable turnover dividend yield gross profit margin dividend payout ratio and valuation ratios. The PE ratio reflects the price currently being paid by the market for each rupee of currently reported EPS.
One of the most commonly used ratios is the gross profit margin which looks at gross profit as a percentage of turnover. On the one hand these ratios give us a good picture of. It is from operating cash flows that companies can service their debt payments.
This means the result of this ratio depicts the profitability of the company per share. Liquidity ratios calculate a businesss ability to turn its assets into cash to pay current liabilities. At other times you can use the Absolute Ratio but it is a less reliable measure compared to the previous ones.