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DOI: 10.9790/5933-0703024051 www.iosrjournals.org 42 | Page Analysis of financial ratios: It is a set of indicators in the form of financial ratios designed to measure Important Balance Sheet Ratios measure liquidity and solvency (a business's ability to pay its bills as they come due) and leverage (the extent to which the business is dependent on creditors' funding). This chapter focuses on the interpretation and analysis of fi nancial statements. Financial ratio analysis Financial ratios or benchmarks are used to assess business profitability, balance sheet structure and overall business performance. • it may be used to identify unusual items, trends or !nancial problems but, to be of any use, it depends entirely on comparisons being made. Investors and creditors can use profitability ratios to judge a company’s return on investment based on … Used with care and imagination, the technique can reveal much about a company and its operations. These ratios indicate the ease of turning assets into cash. These ratios basically show how well companies can achieve profits from their operations. They include the following ratios: Liquidity Ratios. Profitability ratio analysis is widely used by managers, creditors and investors. Wall Street investment firms, bank loan officers and knowledgeable business owners all use financial ratio analysis to learn more about a company’s current financial health as well as its potential. Profitability ratios focus on a company’s return on investment in inventory and other assets. The quick ratio is more conservative than the current ratio because it … The main purpose of this ratio is to control the gross profit or cost of goods sold of the entity. Here is the detail of each Profitability Ratios for Financial Analysis: Gross Profit Margin: Gross Profit Margin is the Profitability Ratios that use to assess the proportion of gross profit over the entity’s net sales. (P.value-0.4582) 6. Problems and Solutions – Ratio Analysis Home → Problems and Solutions – Ratio Analysis PROBLEMS AND SOLUTIONS Type 1: Final Account to Ratio Problem 1. Balance Sheet Ratio Analysis. DATA ANALYSIS AND INTERPRETATION PROFITABILITY RATIOS (1)GROSS PROFIT RATIO TABLE NO: 1 MEAN, S.D, C.V OF GROSS PROFIT RATIO FOR SELECT STEEL COMPANIES Company/year SAIL TATA BHUSHAN VISA JSW 2010-2011 35.25 52.70 27.30 16.06 23.58 To perform fi nancial analysis, you will need to know how to use common-sized fi nancial statements, fi nancial ratios, and the Du Pont ratio method. The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. INTERPRETATION OF ACCOUNTS – RATIO ANALYSIS Introduction • ratio analysis is a method traditionally used by people who wish to understand more fully the !nancial statements and performance of an entity. impacts negatively the profitability of the company. But there are a few things to take in mind about ratios. Profitability ratios Profitability Ratios Profitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders' equity during a specific period of time. In addition, you will learn market-based In the financial analysis, a ratio is used as a benchmark for the evaluation of the financial status and performance of an industry. profitability ratios The use of financial ratios is a time-tested method of analyzing a business. 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