Wednesday, 23 May 2018

Ratio Analysis Part 1

RATIO ANALYSIS Ratio analysis is the process of determining and interpreting numerical relationship based on financial sta...
Basis Of Comparision Comparison with standards or industry average Interfirm Comparison involves comparing the ratios of a...
Ways To Interpret Accounting Ratios <ul><li>Single absolute ratio. </li></ul><ul><li>Group ratio. </li></ul><ul><li>Histor...
Classification Of Ratios <ul><li>Analysis of Short Term Financial Position or Test of Liquidity. </li></ul><ul><li>Analysi...
I. Test Of Liquidity <ul><li>The liquidity ratios are used to test the short term solvency or liquidity position of the bu...
Important Ratios In Test Of Liquidity <ul><li>Current ratio. </li></ul><ul><li>Quick ratio. </li></ul><ul><li>Absolute liq...
Current Ratio Ideal ratio: 2:1 High ratio indicates under trading and over capitalization. Low ratio indicates over tradi...
Quick Ratio or Acid Test Ratio Ideal ratio : 1:1 Usually, a high acid test ratio is an indication that the firm is liquid ...
Absolute Liquidity Ratio Ideal ratio : 1:2 It means that if the ratio is 1:2 or more than this the concern can be taken as...

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