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## Ratio Analysis

Ratio Analysis University of Phoenix HCS/571 Finance Resource Management Sept 24, 2013Rosetta Stringfellow, MBA, BSRatio Analysis Ratio analysis is a widely used managerial tool that compares one number with another to gain insights that would not arise from looking at either of the numbers separately. Ratio analysis is used to examine and interpret the relationship between two numbers on a financial statement. This is done so that the managers

## Ratios And Ratio Analysis

Ratios & Ratio Analysis Reading a company’s financials requires a deep understanding of financial statements and relationships between them. Calculating different performance indicators from the statements requires knowing each sector/segment in them. Finally, the numbers by itself do not say anything specific or definitive about a company because numbers need to be compared to the historical figures of the same company, competitors and an industry. Ratios and their analysis are helpful in revealing

## The Ratio And Cash Ratio

able to quickly react to market moves. There are several ratios that are used to measure liquidity – the current, quick, and cash ratios. Essentially, the higher the current asset ratio, the better. Amazon’s current ratio (107%) is higher than that of Walmart (83%) and this suggests that this company’s short term assets are more readily available to pay off the company’s short term liabilities than Walmart. Amazon’s quick ratio and cash ratio are also higher than that of

## Ratio Analysis: Understanding The Nature Of Ratio Analysis

different decisions regarding the operations of the firm. RATIO ANALYSIS: There are various methods or techniques used in analyzing financial statements, such as comparative statement, trend analysis, common- size statement, schedule of changes in working capital, fund flow analysis, cost - volume profit analysis. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figures and groups

## The Ratio And Profitability Ratio

Profitability Ratio Profitability is important in determining if a company is maximizing wealth because it measures the efficiency and performance of the overall company functions. It is used to determine the worth of investment to stocks. There is two type of profitability ratios. Margins and returns are the profitability ratios. A margin ratio for profitability is cash flow margin. The formula for cash flow margin is cash flow from operating cash flow/ net sales from the cash flow statement

## Financial Ratios and Ratio

0.02 | 0.07 | Return on Equity Ratio | 0.03 | 0.04 | 0.03 | 0.03 | 0.12 | Profit Margin Ratio | 0.02 | 0.02 | 0.01 | 0.02 | 0.02 | Basic Earning Power Ratio | 0.04 | 0.03 | 0.02 | 0.02 | 0.09 | Earnings per Share Ratio | 0.37 | 0.54 | 0.36 | 0.44 | 1.72 | | | | | | | Debt Ratios | | | | | | Total Debt Ratio | 0.94 | 0.53 | 0.56 | 0.53 | 0.53 | Interest Coverage Ratio | 20.97 | 21.31 | 20.07 | 32.84 | 22.92 | Debt/Equity Ratio | 1.15 | 1.13 | 1.25 | 1.11 | 1

## Ratio Analysis : Ratio And Working Capital Ratio

A1d. Ratio Analysis Current Ratio, also known as liquidity ratio and working capital ratio, shows the proportion of current assets of a business in relation to its current liabilities. ("Current Ratio | Formula | Example | Analysis | Industry Standards," n.d.) A ratio of 2 would indicate that current assets would cover current liabilities two times. In year 7, Competition Bikes had a ratio of 5.79. This reflects strength in the company with a strong position in current assets. In year 8, the ratio

## Ratios

|FINAL PROJECT RATIOS | LIQUIDITY AND ACTIVIY Current Ratio measures the ability of a firm to pay its short-term debts. The formula is: |Current Ratio |= |Current Assets | | | |Current Liabilities

## Liquidity Ratios and Activity Ratios

2.0 FINANCIAL RATIOS 2 Liquidity Ratios Liquidity ratios measure a business ' capacity to pay its debts as they come due. It also measures the cooperative’s ability to meet short-term obligations. Liquidity refers to the solvency of the firm’s overall financial position – the ease with which it can pay its bills. Because a common precursor to financial distress and bankruptcy is low or declining liquidity, these ratios can provide early signs of cash flow problems and impending

## Ratio Analysis And Ratio Analysis

RATIO ANALYSIS: • Definition: Ratio analysis is the correlation of diverse amounts or number in company financial account to sort how successful a company is. It’s an effective tool that can help you to know the financial results and change of trend over time and use to evaluate company performance. Furthermore company can find their strengths and weaknesses through which you can estimate future financial performance. • Four types of Ratio Analysis: Liquidity Ratio Solvency or Leverage Ratio