Ratio

Analysis
 Page | 1

Sl. Name Arithmet Significance Standar Interpretati Corrective Corrective

N ic d on of the measure if Measure
o Formula Ratio ratio the ratio is Taken by
unfavorabl the
e in company.
general
1. Gross Gross Evaluates how The It evaluates If the ratio is The Gross
Profit Profit/Net much gross profit analyst the unfavorable, Profit Ratio for
Ratio Sales is generated from should operational the the year end
sales compare performance company 2016 is 15.22
the ratio of the should try to and 13.59 for
the year ended
with the business reduce the
2015 which
previous over the past cost of
shows that
years years and it service or company is
ratio indicates production. generating
improvement One such more gross
has taken way is by profit compared
place or not. finding to previous
cheaper year.
sources of
raw material
and Service.
2. Return Net Measure The It shows how A company 462.97 as
on Income / of return on analyst efficiently a can arrive at compared to
Assets Average investment and is should company can a high ROA 431.28 in
Total also used in compare convert the either by previous
Assets evaluating the ratio money used boosting its year
management's with the to purchase profit
efficiency in using other assets into margin or,
assets to companie net income more
generate income s in the or profits. efficiently,
industry. by using its
assets to
increase
sales
 Page | 2

4. Current Current Indicates the Ideal The Unfavorable 0.49

Ratio Assets / ability to repay Ratio is company is situation
Current short-term between managing means the
liabilities liabilities 1.33 to 2 the working company is
capital unable to
efficiently collect its
asset and
discharge
its liabilities.
The
company
may be
required to
bring in
capital for
fund 25% of
current
assets.
5. Quick Quick Measures the Ideal ratio The business Unfavorable 0.63
Ratio Assets / ability of a is can meet its situation
Current company to pay between current means the
Liabilities short-term 1:1 financial company
does not
obligations using obligations
have
the more liquid with the
sufficient
types of current available quick assets
assets or "quick quick funds and
assets" on hand. discharge its
liabilities. The
company
may be
required to
increase its
quick assets
either by
increase in
Cash, cash
equivalents,
or short-term
investments
or
marketable
securities,
and current
accounts
receivable
 Page | 3

6. Receivab Net Credit Measures the The It interprets Unfavorable 13.44 as

le Sales / efficiency of analyst the true situation compared to
Turnover Average extending credit should liquidity of means the 11.19 in the
company previous year ,
Ratio Accounts and collecting the compare the business
means that the
Receivabl same the ratio in the eyes has high
company has
e with the of the trade become more
previous analyst and receivables efficient in
years indication of compared to collecting funds
credit sales. from debtors.
ratio the quality of
The
credit sales
company
and
may install
receivables.
better
collecting
processes
and improve
its credit
policy.
 Page | 4

7. Accounts Net Credit Represents the The It indicates Unfavorabl

Payable Purchases number of times a analyst the e situation
Turnover / company pays its should creditworthin means the
Avg. accounts payable compare ess of the company
Accounts during a period the ratio company has high
Payable with the trade
previous payables
years compared
ratio to credit
purchses.
8. Debt- Total Evaluates the A D/E It indicates --
Equity Liabilities capital structure of a ratio of the
Ratio / Total company more soundness of
Equity than 1 long-term
implies financial
that the policies and
company long term
is a solvency of a
leveraged company
firm; less
than 1
implies
that it is a
conservati
ve one
9. Times EBIT / Measures the <1 = isnt It represents Unfavourab
Interest Interest number of times making how much a le situation
Earned Expense interest expense is enough company can means the
converted to money to afford to pay company is
income, and if the pay its its interest. unable to
company can pay its interest generate
interest expense obligation sufficient
using the profits s. EBIT to pay
generated =1 = just its interest.
enough The
money to company
pay its may
int. increase its
obligation revenue
s. from
>1 = operations
more and
than decrease
enough its cost of
 Page | 5

money. production.
10 Earnings ( Net EPS shows the rate The It is the
. per Income - of earnings per analyst indication of
Share Preferred share of common should change in the
Dividends stock compare earning
)/ the ratio power of the
Average with the company
Common other actual and
Shares companie potential
Outstandi s in the common
ng industry stockholders

11 Price- Market Used to evaluate if a The It indicates

. Earnings Price per stock is over- or analyst performance
Ratio Share / under-priced. should and growth in
Earnings compare the future,
per Share the ratio and the
with the market is
other willing to pay
companie for a stock
s in the based on its
industry current
earnings.

12 Dividend Dividend Determines the

. Pay-out per Share portion of net
Ratio / Earnings income that is
per Share distributed to
owners
13 Dividend Dividend Measures the The It defines the
. Yield per Share percentage of return analyst cash flow
Ratio / Market through dividends should generating
Price per when compared to compare from
Share the price paid for the ratio investment in
the stock with the stocks
other
companie
s in the
industry

14 Return Net measures how much The It indicates

. on Income / the shareholders analyst how
Equity Average earned for their should effectively
Sharehold investment in the compare assets are
 Page | 6

ers company the ratio performing

Equity with the while taking
previous into
years consideration
ratio its equity
share holders.

16 Proprieta Stockhold It tells about the The It evaluates

. ry ratio ers financial position of analyst the
equity / the company and should soundness of
Total security or risk for compare the capital
assets. creditors the ratio structure of a
with the company.
other
companie
s in the
industry

17 Capital Common It is the measure of The The ratio

. gearing stockhold capital structure analyst indicates the
ratio ers analysis and should financial risk
equity / financial strength of compare to which a
Fixed the company and is the ratio business is
interest of great importance with the subjected,
or for actual and previous since
dividend potential investors. years excessive
bearing ratio debt can lead
funds to financial
difficulties

18 Debt Net It measures a firm's Ideal ratio The increase

. service operating ability to make its should be or decrease
coverage income(E current debt greater of the DSCR
ratio(DS BIT) / obligations, current than 1 over time a
CR) Total debt and future creditors company can
service are particularly determine if
costs interest in it. they are
building
liquidity in
the business

19 Assets Net It gives investors The It indicates 3.36

. turnover sales and creditors an analyst how well
ratio /Average idea of how a should management
 Page | 7

total company is compare and

assets managed and uses the ratio production
its assets to produce with the department
products and sales. other are operating.
companie
s in the
industry

20 Operatio Operating It shows whether The It indicates -0.59

. nal profit profit /Net the cost component analyst the
ratio sales in the sales figure is should operational
within normal range compare efficiency of
the ratio the
with the management.
previous
years
ratio