Friday 4 January 2019

Financial ratio analysis | Different Types

Financial Analysis

A Financial ratio analysis is a quantitative analysis use to evaluate various aspects of operating and financial performance of the company base on the information contain in company financial reports such as reports on the balance sheet (balance sheet), the cash flow report (cash flow statement) and income statement.

The financial ratios can be use by management of the company. The lender or lenders and investors and shareholders. Financial ratios are also use by the analysis of securities and credit rating agencies to assess the strengths and weaknesses of the various companies who will analyze.

Financial ratios Analysis according to experts

The following are some definitions or understanding the Financial Ratio Analysis (Financial Ratio Analysis), according to some experts:

Is a financial ratio analysis technique in the field of financial management which is use as a gauge of a company's financial condition in a certain period, or the results of the efforts of the something

  • The company at a certain period by way of comparing two variables are taken from the financial statements of the company, good list of balance sheet or profit loss.

  • A financial Ratio is an activity comparing the figures that exist in the financial statements by means of dividing one number by another number. A comparison can be made between one component with a component in a financial statement or inter-component that exist between the financial statements.

  • Financial Ratio Analysis is a way that makes comparison of financial data of the company to be more meaning. Financial ratios became the basis for answering a few important questions about the financial health of the company.

  • Ratio analysis is a method of analysis to figure out the relationships of certain posts in the balance sheet or income statement individually or a combination of both these reports.

The Benefits of Financial Ratio Analysis

 Financial Ratio Analysis delivers a range of benefits for the management of the company, creditors and investors. Some of the benefits of financial ratio analysis is as follows:

  1. Help analyze trends in the performance of a company.

  2. Help the stakeholders to compare the financial results of a company with its competitors.

  3. Helping management, lenders and investors to make decisions.

  4. Can show the location of the company's financial problems as well as strength and weakness.

Types of Financial Ratio Analysis (Financial Ratio Analysis)

In General, Financial Ratio Analysis (Financial Ratio Analysis) can be differentiate into several types. Namely the profitability Ratio Analysis, ratio analysis, the analysis of Solvency Ratio Liquidity ratio analysis and activity.

Ratio analysis of profitability

The ratio of Profitability is a ratio use to measure a company's ability to generate profit from income related to sales, assets and equity. Some type of profitability ratios is often use is gross profit Margin, net profit Margin, Return on Assets, Return on Equity (ROE), Return on Sales (ROS), Return on Capital the self-employ (ROCE).

The Solvency Ratio Analysis

The ratio of Solvency or Leverage Ratio is a financial ratio that measures the company's ability. To meet long-term obligations such as the payment of interest on the debt, principal payment ends up in debt and other fix obligations. Types of Solvency Ratio or Leverage ratio that is often use is the ratio of the debt Against equity. (Debt to Equity Ratio). The ratio of Debt (Debt Ratio) and the Times Interest Earned Ratio.

The liquidity Ratio Analysis

The liquidity ratio is the ratio that measures the company's ability to meet its short-term debt obligations when due. This ratio measures the company's ability to pay short-term obligations when due. Financial ratios that are include as these are liquidity ratios current ratio (assets ratio). The ratio of liquid (quick acid test ratio) and the ratio of cash (the Cash Ratio).

Ratio analysis Activity

The ratio of activities or often call Efficiency ratio is a financial Ratio analysis types. That measures how effectively a company leveraging their assets to generate revenue. The classify analysis of the ratio of these activities such as Inventory Turnover Ratio (Inventory Turnover Ratio). The Total Assets Turnover Ratio (Total Active Turnover Ratio) and the ratio (fixed assets Turnover Fixed Asset Turnover Ratio).

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