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Ratio Analysis, : - Coggle Diagram
Ratio Analysis
Profitability Ratios : :
2.operating ratio
Operating Ratio = (Cost of Revenue from Operations + Operating Expenses/Revenue from Operations) x 100
operating ratio = Office Expenses + Selling and Distribution Expenses + Employees Benefit Expenses + Depreciation and Amortization Expenses.
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Net Profit = Revenue from Operations – Cost of Revenue from Operations – Operating Expenses – Non-operating Expenses + Non-operating Incomes – Tax
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Return on Investment = (Net Profit before Interest, Tax and Dividend/Capital Employed) x 100
Liquidity Ratio
Liquidity Ratio is a short term ratio used to determine a company ability to pay it's current debt obligation. Basically its a comparision of current assets and current labilities.
1) Current Ratio = current assest/current lability
It is a liquidity ratio which measures a company's ability to pay short term obiligation within an year..
Standard ratio= 2:1
2) Quick Ratio= quick ratio/current lability
The assets which can be used by the company which we can convert into near cash immediately with quick assets in accordance to current lability.It leaves out current assets such as inventory and prepaid expenses bcz the two are less liquid.
Standard ratio= 1:1
3) Cash Ratio= (cash+ marketable securities)/current labilities
The cash ratio take the test of liquidity even further. It cover short term obligation using only cash or cash equivalent.
The cash ratio is a measurement of a company's liquidity, specifically the ratio of a company's total cash and cash equivalents to its current liabilities.
Standard ratio= 0.5:1
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