Ratio Analysis for Profitability and Liquidity

ratio Analysis for Profitability and Liquidity

fiscal year. Ratios are also analyzed using trend analyses, which examine the firm's ratios as a function of time. Formula: Current Assets / Current Liabilities As mentioned in the table the current ratio of the company in the year 2014 was.77.e. Debt-Equity ratio Total Liabilities/ Shareholder's Equity IBMs Debt-Equity ratio:.80 billion/.03 billion.39. Net profit my Secret and My Dreams margin: Net profit margin of the company is the percentage of the revenue amount left after deducting all the expenses from the sales. Example include cash flow per share. Thats why a low working capital turnover ratio most likely indicates an unprofitable use of working capital. Liquidity Ratios Liquidity is the firm's ability to pay its short-term obligations as they come due. Disparity is reduced by restating assets acquired in different years in "constant" dollars to ensure each asset has equal purchasing power. The gross profit margin should not drastically fluctuate from one period to another.

Analysis, for, solvency, profitability, and, liquidity, free Essays.
The current ratio and current debt coverage ratios.
Profitability, Efficiency, Liquidity and, financial Gearing Ratios.

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Gearing Ratio Gearing ratio is the financial leverage that use to identify the degree of the firms operations and will find out the fund invested by the equity capital in ratio with the borrowed funds. Formula: Current Assets- Inventory / Current Liability As shown, this ratio is not so good for the company. Cash Ratio (Cash Cash Equivalents Invested funds Current liabilities IBMs Cash Ratio.47 billion/39.6 billion0.21 Cash Conversion Cycle This metric shows the number of days a firm takes in selling its inventory, collect receivables and finally complete its payables. Cash Ratio (Cash Equivalents Marketable Securities) Current Liabilities. This shows that it can cover its debt obligations in less than a year's cash flow. We will look. If the ROE is inadequate, the DuPont analysis can assist in locating the under performing area of the company. Ratio comparisons and ratio analyses are less reliable when based on financial statements that are adjusted for inflation. Net Credit Sales Average Accounts Receivable accounts receivable turnover inventory turnover Inventory Turnover ratios become important when there is an excess of inventory that is restricting cash flow, reducing opportunities for profit, and increasing costs for storage.