商务英语综合教程课件杜凤秋 ISBN9787810788113 PPT international economychap.11 analysing financial ratio.pptVIP

Analyzing Financial Ratios Analyzing Financial Ratios What are Financial Ratios? A ratio is an expression of the relationship of one number to anther. The relationship of 1to 3, can be expressed as “1 to 3” “1:3” “1/3” Analyzing Financial Ratios One of the most basic, and probably one of the most useful tools of ratio analysis is the “common size statement” a common size statement presents every item as a percentage of the largest item on the statement. A balance sheet can be turned into a common size statement; so can an income statement. Analyzing Financial Ratios Dollar amounts common size percentage Sales $100,000 100 % Cost of goods sold $30,000 30 % Gross profit $70,000 70 % Operating expenses $54,000 54 % Net income $16,000 16 % Notes: common size percentages clarify the relationships among the statement’s components, facilitating comparisons between two years or between two company in the same year. Analyzing Financial Ratios There are three other general groups of ratios: 1. liquidity and turnover ratios measure a company’s ability to meet current obligation on time and to use assets efficiently. 2. leverage or solvency ratios measure the degree to which the company has obtained financing by using funds of no owners as opposed to using funds of owners. 3. profitability ratios measure a company’s efficiency in generating sales and controlling expenses, as reflected in net profits. Analyzing Financial Ratios 1. Liquidity and turnover ratios all have to do with current assets. Liquidity ratios measure a company’s ability to pay current debts on the basis of current assets. Turnover ratios (activity ratios) assess the movement of the company’s current assets. Liquidity and Turnover Ratios Current Ratio : how many times current assets can pay current liabilities. The larger the first number, the greater the asset strengt