Profitability is a measure of efficiency and control. It indicates the efficiency or effectiveness with which the operations of the business are carried on. Poor operations may result in poor sales and therefore low profits. Low profitability may be due to a lack of control over expenses resulting in low Read more…
The operational efficiency of an organisation is its ability to utilise the available resources to the maximum extent. Success or failure of a business in the economic sense is judged in relation to expectations, returns on invested capital and objectives of the business concern. There are many techniques available for Read more…
Preference Dividend Cover: This ratio expresses Net Profit after tax as so many times of Preference Dividend Payable. This is calculated as: (Net Profit after tax / preference dividend) Equity Dividend Cover: This ratio provides us with information about net profit available to equity shareholders. This ratio expresses profit Read more…
Liquidity ratios measure a company’s ability to fulfill its short-term obligations and reflect a company’s short-term financial strength / solvency. The term liquidity is described as convertibility of assets ultimately into cash in the course of normal business operations and the maintenance of regular cash flow. A sound liquid position Read more…
The successful operation of a business generally requires some assets of fixed character. These assets are used primarily in producing goods and in operating the business. With the help of these, raw materials are converted into finished products. Fixed assets are not meant for sale and are kept as a Read more…
Financial strength indicates the soundness of the financial resources of an organisation to perform its operations in the long run. The parties associated with the organisation are interested in knowing the financial strength of the organisation. Financial strength is directly associated with the operational ability of the organisation and its Read more…
The following are the important tools of financial analysis which can be appropriately used by the financial analysts: Common-size financial statements Comparative financial statements Trend percentages Ratio analysis Funds Flow analysis Cash Flow analysis Common-size Financial Statements: In this type of statements figures in the original financial statements are converted Read more…
A quantitative tool used for gaining insight into a company’s liquidity, operational efficiency, and profitability by comparing the information contained in its financial statements, This is what Ratio analysis is. Advantages of Ratio Analysis It simplifies complex accounting statements and financial data into simple ratios, this makes the process of Read more…