July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They...
-
Upload
sherman-booth -
Category
Documents
-
view
215 -
download
0
Transcript of July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They...
![Page 1: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/1.jpg)
Finance for Business Leaders- Ratio Analysis
July 8, 2011
![Page 2: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/2.jpg)
Financial Ratio AnalysisFinancial ratios combine different financial
parameters.They are based on the financial data drawn from
the balance sheet and the P&L account.Each ratio is studied both by itself and along with
other ratios, in order to gain critical insights.Different ratios are used to analyse the different
dimensions of a business.
![Page 3: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/3.jpg)
TCS Financial Ratios ( 2009-10)
3
![Page 4: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/4.jpg)
TCS Financial Ratios ( 2009-10)
4
![Page 5: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/5.jpg)
Wipro Financial Ratios ( 2009-10)
5
![Page 6: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/6.jpg)
Profitability ratiosThese ratios measure how
profitable the business is with respect to sales and assets.
6
![Page 7: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/7.jpg)
Gross Profit Margin = (Sales – Cost of Goods Sold) ÷ (Sales)
![Page 8: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/8.jpg)
Operating profit margin(Gross Profit – SG&A - R&D ) ÷ (Sales)
8
![Page 9: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/9.jpg)
Net Profit Margin = (Profit After Tax) ÷ (Sales)
![Page 10: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/10.jpg)
Return on Assets = (Profit After Tax) ÷ (Total Assets)
![Page 11: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/11.jpg)
Return on Investment (ROI)The return on investment is computed as under: ROI = [(PBIT) ÷ (Total Capital Employed)] = [(PBIT) ÷ (Shareholders’ Net Worth +
Borrowings)]
![Page 12: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/12.jpg)
Activity ratiosThese ratios measure how efficiently
the assets of the business are being used.
12
![Page 13: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/13.jpg)
Inventory Turnover Ratio = (Cost of Goods Sold) ÷ (Inventory)
![Page 14: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/14.jpg)
Average Collection Period (Debtors Turnover) = (Debtors) ÷ (Average Daily Sales)
![Page 15: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/15.jpg)
Capital Employed Turnover = (Sales) ÷ (Capital Employed)
![Page 16: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/16.jpg)
Fixed Assets Turnover = (Sales) ÷ (Net Fixed Assets)
![Page 17: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/17.jpg)
Liquidity RatiosThese ratios measure to what extent
the business has funds available to meet its obligations.
17
![Page 18: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/18.jpg)
Current Ratio = (Current Assets) ÷ (Current Liabilities)
![Page 19: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/19.jpg)
Quick Ratio or Acid Test Ratio = (Quick Assets) ÷ (Current Liabilities)Quick assets = Current assets - Inventory
![Page 20: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/20.jpg)
Leverage ratiosThese ratios measure the extent of
financial risk assumed by the business, ie the level of debt in relation to equity.
20
![Page 21: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/21.jpg)
Debt-Equity Ratio = (Long Term Debt) ÷ (Shareholders’ Net Worth)
![Page 22: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/22.jpg)
Total Debt to Total Capital Employed Ratio = (Total Debt) ÷ (Total Capital Employed)
![Page 23: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/23.jpg)
Coverage ratiosThese ratios measure the availability
of funds to meet various financial obligations.
23
![Page 24: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/24.jpg)
Interest Coverage = (Profit Before Interest and Tax) ÷ (Interest
Charges)
![Page 25: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/25.jpg)
Dividend Cover = (Profit after Tax less Preference Dividend) ÷
(Equity Dividend)
![Page 26: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/26.jpg)
Debt Service Coverage Ratio= (Profit Before Interest and Tax) ÷ (Loan Installments + Interest)
![Page 27: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/27.jpg)
Shareholder ReturnsThese ratios measure how well the
shareholders are being rewarded by the company.
27
![Page 28: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/28.jpg)
Return on Shareholders’ Net Worth = (Net Profit After Tax – Pref. Dividend) ÷ (Equity Shareholders’ Net Worth)
![Page 29: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/29.jpg)
Earnings Per Share (EPS) = (Net Profit After Tax – Pref. Dividend) ÷
(Number of Equity Shares)
![Page 30: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/30.jpg)
Dividend Per Share= (Dividends paid to Equity Shareholders) ÷
(Number of Equity Shares)
![Page 31: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/31.jpg)
Dividend Pay-out Ratio = (Dividend per share) ÷ (Earnings per Share)
![Page 32: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/32.jpg)
Dividend Yield = (Dividend per share) ÷ (Market Value per
share)
![Page 33: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/33.jpg)
Earnings Yield = (Earnings per share) ÷ (Market Value per
share)
![Page 34: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/34.jpg)
Valuation ratiosThese ratios are useful in arriving at
a realistic valuation of the business.
34
![Page 35: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/35.jpg)
Price/Earnings Ratio (P/E ratio) = (Market Value per Share) ÷ (Earnings per
share)
![Page 36: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/36.jpg)
Book Value per Share = (Net Worth – Preference Share Capital) ÷ (No
of shares)
![Page 37: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/37.jpg)
Market Price to Book Value = (Market Price per Share)÷ (Book Value per
share)
![Page 38: July 8, 2011. Financial Ratio Analysis Financial ratios combine different financial parameters. They are based on the financial data drawn from the balance.](https://reader030.fdocuments.us/reader030/viewer/2022032702/56649cef5503460f949be198/html5/thumbnails/38.jpg)
Thank You
38