0
How might financial ratios be used when planning and implementing financial activites?
Wiki User
∙ 11y ago
Financial ratios can be used for comparison
• between two or more companies (ex: comparison between ICICI and HDFC Banks)
• between two or more industries (ex: comparison between the Banking and Auto industry)
• between different time-periods for the same company (ex: comparison on the results of the company in the current financial year and the previous year)
• between a single company and the industry performance
Ratios are generally meaningless unless we benchmark them against something else. Like say past performance or another company. Ratios of firms that operate in different industries, which face different risks, capital requirements, competition, customer demand etc can be very hard to compare.
Wiki User
∙ 12y ago
Wiki User
∙ 10y agoThe most important ratio to evaluate the personal financial progress is current ratio. or liquidity ratio.
Wiki User
∙ 11y agoratio may be used for planning their own business
Wiki User
∙ 10y agoFinancial ratios are used in a majority of companies. Financial ratio is defined as a magnitude of selected numbers that are taken from a company's financial statements.
Add your answer:
Earn +20 pts
Describe the four approaches to using financial ratios?
Describe the four approaches to using financial ratios?
What are the key determinants of a financial structure?
financial ratios
How many financial ratios are there?
25
In financial analysis why does the analyst compute financial ratios rather than simply studying raw financial data?
In financial analysis the analyst compute financial ratios to determine the financial health of an financial institutoin rather than simply studying raw financial data.
What is composite ratios?
composite ratios are those which are compared between atleast two financial statements .
What value do financial ratios offer investors in reviewing financial performance of a firm?
Investors look at financial ratios to understand how businesses are performing. They use this information to determine whether they would like to invest or not.
What value do financial ratios offer investors in reviewing the financial performance of a firm?
Investors look at financial ratios to understand how businesses are performing. They use this information to determine whether they would like to invest or not.
Is not part of an external audit?
Analyzing financial ratios
Relationships determined from a firm's financial information and used for comparison purposes are known as?
financial ratios
What are the Sources of Data for Financial Ratios?
Financial ratios of all company's can be calculated based on their financial statements that would be declared during their quarterly result announcement. Balance Sheet, Income Statement, Statement of Cashflows, Statement of Earnings etc are some of the documents from which the information required for calculating these financial ratios can be picked up. Also, if the company is listed in the stock market, its current stock price too is used for calculating some of these ratios.
Describe the five question approach to using financial ratios?
Leverage Financial Ratios Those financial ratios that show the percentage of a company's capital structure that is made up on debt or liabilities owed to external parties Liquidity Financial Ratios Those financial ratios that show the solvency of a company based on its assets versus its liabilities. In other words, it lets you know the resources available for a firm to use in order to pay its bills, keep the lights on, and pay the staff. Operating Financial Ratios These financial ratios show the efficiency of management and a company's operations in utilizing its capital. In the retail industry, this would include metrics such as inventory turnover,accounts receivable turnover, etc. Profitability Financial Ratios These financial ratios measure the return earned on a company's capital and the financial cushion relative to each dollar of sales. A firm that has high gross profit margins, for instance, is going to be much harder to put out of business when the economy turns down than one that has razor-thin margins. Likewise, a company with high returns on capital, even with smaller margins, is going to have a better chance of survival because it is so much more profitable relative to the shareholders' contributed investment. Solvency Financial Ratios These financial ratios tell you the chances of a company going bankrupt. There's really no elegant way to say that. The whole point of calculating them is to make sure that a company isn't in danger of going under anytime soon.
What are financial ratios?
There are many different financial ratios used as the indicators and they are differently use based on the purpose of what areas, or risks that the appraiser concern about. Financial Ratios are the useful tool to measure that company performance financially; however, the Key Financial Performance Indicators turn to be less popular or they can not use alone to measure how success the entity is. We will talk in detail below why Financial Ratios is less popular in the Current Strategic Performance Appraisal. financial-ratios.info
