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Balance Sheet Analysis - Coggle Diagram
Balance Sheet Analysis
Financial Ratios
Efficiency
Ave Inventory Turnover Period
= ((Opening Inventory Balance + Closing Inventory Balance) / 2) / COS) X 365
Average Settlement Period for Trade Payables (Time taken to pay funds to creditors)
= (Ave Trade payables / COS) X 365
Average Settlement Period for Trade Receivables
= (Ave Trade Receivables / Revenue) X 365
Liquidity
Measure of how quickly a business pays its short term obligations
Current Ratio
= Current Assets / Current Liabilities
Assets exclude long term assets
Quick Ratio
= (Current Assets - Inventory) / Current Liabilities
Inventory not very liquid so excluded.
Solvency
Measure of the extent long term debt is used to finance operations
Debt Ratio
= Total Liabilities / Total Assets
Company's ability to pay long term liabilities
Debt to Equity Ratio
Total Debt / Total Equity
Profitability
Calculated from Income Statement
Retained Earnings
Step 1: Calculate Shareholders Equity by subtracting Total Liabilities from Total Assets
Step 2: Obtain Share Capital from Balance Sheet
Step 3: = Shareholder's Equity - Share Capital