Ratio Analysis
Valuations
Charting Technique
- A Ratio provides relation between two numbers
- Ratios are calculated based on book values, not real economic values or price-level effects
- ratios may vary from entity to entity,as different entities having different policies
- It facilitate comparisons between two numbers
- Balance sheet ratios: based on Balance Sheet Numbers
- Profit and loss account ratios: based on profit and loss accounts
- Balance sheet and Profit & Loss both statements
- We can calssify the ratios based on users: such as shareholders, creditors, Debtors etc
- 3rd way is based on functions such as profitability ratios, Liquidity ...
- Interms of Percentage - - 30%,45%
- Interms of Proportion -- Sales to Expenditure 1:5
- Times: Expenditure is 1/3 rd of Sales
Imporatnce of Ratio Analysis
We can calssify the ratios in 3 ways
1)Classification of Ratios based on Statements:
2)Classification of Ratios based on USERS:
2)Classification of Ratios based on Functions\Categories:
In how many ways Ratios can be expressed?
Ratios can be expressed in:
Ratio - and its measure
