Ppropriateness OF Inancial Atios: IN Different Sectors
Ppropriateness OF Inancial Atios: IN Different Sectors
Ppropriateness OF Inancial Atios: IN Different Sectors
OF
FINANCIAL RATIOS
IN DIFFERENT SECTORS
ALI DANISH
MB2-11-43
FINANCIAL ANALYSIS
The analysis in which you collect, evaluate and interpret the financial data in order to provide purposeful information to investors for making their decisions. The financial analysis is a two way process.
Why
How
CATEGORIES OF RATIOS:
LIQUIDITY RATIOS:
Current Ratio:
EFFICIENCY RATIO :
CONTINUE:
A/c R.T.O.D:
Inv T.O:
Inv T.O.D:
PROFITABILITY RATIOS :
Net profit ratios = net income / net sales Operating profit = op. income/ net sales Gross profit ratios = gross profit / net sales Sales to fixed asset = net sales / net fixed asset
ARSLAN HUSSAIN
MB2-11-34
FINANCIAL LEVERAGE
Equity Debt
Debt financing is more risker one because it generates the legal obligation of payments like interest and principle. Financial leverage shows the extent to which the debt is used with respect to equity. Higher this ratio reflect the higher risk and higher returns.
Debt ratios show the proportion of assets which are financed by the debt. Higher ratio reflect higher leverage which leads toward high risk. Ratios are calculated as:
It measures the companies ability to pay its interest payment in future and calculated as:
SHAREHOLDER RATIOS
These ratios compare the results of operations with respect to the shares. This ratio includes:
Earning per share Book value of equity Price earning ratio Dividend payout ratio Dividend yield Plowback ratio
It show how much earning we have generated during a period with respect to one share and computed as:
It tells us about how much an investor is willing to pay in order to get 1 rupee earning and calculated as:
Also known as retention ratio and reflects the amount of earnings which a company retains for reinvestment and calculated as:
DIVIDEND YIELD
Dividend yield is the return to the shareholders which are measured in terms of the dividend paid during the period
ARTICLE PRESENTATION
BY
Sheikh Hussnain M B 2 - 11 - 6 3
INTRODUCTION
In financial statement analysis it is common to compare the various financial ratios of a business firm with industry averages. The evaluation of a firm's performance and financial status becomes strongly dependent on the financial ratios of the industry, and particularly dependent on how these ratios are distributed. Comparing the financial ratios between firms may, however, be quite misleading, especially when the structure of the firms is not homogenous.
RESEARCH PROBLEM
The object of this study is to establish whether it is a reasonable practice for a firm to compare its central financial ratios to industry averages in order to acquire information on the performance and the state of the firm. If homogeneity of financial ratios prevails in an industry branch, comparisons with industry averages or other firms within the industry will give valuable information.
In cases of heterogeneity comparisons to the industry average, as well as to the other firms within the industry, mainly reflect the differences of the structures of the firms rather than the differences in their financial performance.
APPROACH
Dynamic measure of financial ratio closeness between pairs of firms is developed. 2. The firms under observation are grouped into homogeneous clusters on the basis of this closeness measure. 3. The congruence of this clustering with the standard industry classification is measured.
1.