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It is a type of financial ratio used to measure the efficiency of business in generating profit by utilizing assets The larger the turnover ratio, the better as it shows that the company is optimally utilizing its assets as resources to earn revenue Turnover ratios are calculated by dividing the revenues from average asset balance It is also termed as efficiency ratio because it shows the company’s efficiency in conversion of assets into sales which in turn reflects the ROI Inventory Turnover ratio measures how efficiently the stocks are being converted into finished goods to generate sales It is calculated as – Inventory Turnover Ratio = (Cost of Goods Sold)/(Average Inventory) Debtors Turnover Ratio signifies the efficiency of business in converting its debtors or credit sales into cash It is calculated as – Debtors Turnover Ratio = (Net Credit Sales or Revenue)/(Average Trade Receivables) Fixed assets turnover ratio measures how efficiently a company uses its fixed assets to generate revenue Fixed Assets Turnover Ratio = (Revenue from sales)/(Average Fixed Assets) Total assets turnover ratio takes into account both fixed as well as current asset to measure the overall efficiency in generation of revenue with assets utilization It is calculated as – Total Assets Turnover Ratio = (Revenue from sales)/(Average Total Assets) Working capital ratio measures the company’s efficiency in using its working capital to generate revenue for the business It also indicates the relation between liquidity and profitability of the business It is calculated as – Working Capital Turnover Ratio = (Revenue from sales)/(Average Working Capital) Thank you for Watching Subscribe to DevTech Finance
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Leverage ratio is the ratio which states the mixture of debts and equity in the company that is associated with the investments made by the company. Leverage ratio clearly explains the capitals structure of the company which includes equity and debts. Copy the link given below and paste it in new browser window to get more information on Leverage Ratios:- http://www.transtutors.com/homework-help/finance/leverage-ratios.aspx
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Profitability Ratio A profitability ratio is a measure of financial ratio defining the profit percent and return percent from the business using data from financial statements at a specific point of time It assess business’s ability to generate gross profit, operating profit and net profit from the sales using data from profit& loss statement It even takes into consideration various return generating ability of business in terms of return on assets, return on capital employed, return on equity, return on investment using data from balance sheet Types of profitability ratio Gross Profit Ratio, Net Profit Ratio, Operating Profit Ratio, Return on Assets, Return on Equity, Return on Investment, Return on Capital Employed Gross Profit Ratio Gross Profit Ratio(GPR) is a profitability ratio that shows the relationship between gross profit and the revenue from net sales GPR = (퐆퐫퐨퐬퐬 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬) Net Profit Ratio The net profit ratio is equal to how much net profit is generated as a ratio of revenue earned through sales Net Profit Ratio = (퐍퐞퐭 푷풓풐풇풊풕)/(퐍퐞퐭 푺풂풍풆풔) Operating Profit Margin is a profitability ratio used to calculate the percentage of operating profit a company produces from its operations, prior to deduction of taxes and interest charges Operating Profit Ratio Operating Profit Ratio = (퐎퐩퐞퐫퐚퐭퐢퐧퐠 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬) Return on assets (ROA) is a kind of profitability measure used to determine returns on assets relevant when compared across the companies or previous performance of the company Return On Asset = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐀퐬퐬퐞퐭퐬) Return on equity (ROE) is a measure of financial performance calculated by dividing net profit by average shareholders' equity ROE = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐄퐪퐮퐢퐭퐲) Return on capital employed is a profitability ratio used in valuation of company’s financial position depicting the return out of capital employed ROCE = 퐄퐁퐈퐓/(퐂퐚퐩퐢퐭퐚퐥 퐄퐦퐩퐥퐨퐲퐞퐝) Return on investment is a profitability measure used by businesses to identify the efficiency of business in generating return out of an investment ROI = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐂퐨퐬퐭 퐨퐟 퐈퐧퐯퐞퐬퐭퐦퐞퐧퐭) Ratio analysis refers to the analysis and interpretation of the data collected from the financial statements (i.e., Profit and Loss Statement, Balance Sheet and Fund/Cash Flow statement etc.) Thank You for Watching DevTech Finance
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It is a type of financial ratio used to measure the efficiency of business in generating profit by utilizing assets The larger the turnover ratio, the better as it shows that the company is optimally utilizing its assets as resources to earn revenue Turnover ratios are calculated by dividing the revenues from average asset balance It is also termed as efficiency ratio because it shows the company’s efficiency in conversion of assets into sales which in turn reflects the ROI Inventory Turnover ratio measures how efficiently the stocks are being converted into finished goods to generate sales It is calculated as – Inventory Turnover Ratio = (Cost of Goods Sold)/(Average Inventory) Debtors Turnover Ratio signifies the efficiency of business in converting its debtors or credit sales into cash It is calculated as – Debtors Turnover Ratio = (Net Credit Sales or Revenue)/(Average Trade Receivables) Fixed assets turnover ratio measures how efficiently a company uses its fixed assets to generate revenue Fixed Assets Turnover Ratio = (Revenue from sales)/(Average Fixed Assets) Total assets turnover ratio takes into account both fixed as well as current asset to measure the overall efficiency in generation of revenue with assets utilization It is calculated as – Total Assets Turnover Ratio = (Revenue from sales)/(Average Total Assets) Working capital ratio measures the company’s efficiency in using its working capital to generate revenue for the business It also indicates the relation between liquidity and profitability of the business It is calculated as – Working Capital Turnover Ratio = (Revenue from sales)/(Average Working Capital) Thank you for Watching Subscribe to DevTech Finance
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Leverage ratio is the ratio which states the mixture of debts and equity in the company that is associated with the investments made by the company. Leverage ratio clearly explains the capitals structure of the company which includes equity and debts. Copy the link given below and paste it in new browser window to get more information on Leverage Ratios:- http://www.transtutors.com/homework-help/finance/leverage-ratios.aspx
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Profitability Ratio A profitability ratio is a measure of financial ratio defining the profit percent and return percent from the business using data from financial statements at a specific point of time It assess business’s ability to generate gross profit, operating profit and net profit from the sales using data from profit& loss statement It even takes into consideration various return generating ability of business in terms of return on assets, return on capital employed, return on equity, return on investment using data from balance sheet Types of profitability ratio Gross Profit Ratio, Net Profit Ratio, Operating Profit Ratio, Return on Assets, Return on Equity, Return on Investment, Return on Capital Employed Gross Profit Ratio Gross Profit Ratio(GPR) is a profitability ratio that shows the relationship between gross profit and the revenue from net sales GPR = (퐆퐫퐨퐬퐬 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬) Net Profit Ratio The net profit ratio is equal to how much net profit is generated as a ratio of revenue earned through sales Net Profit Ratio = (퐍퐞퐭 푷풓풐풇풊풕)/(퐍퐞퐭 푺풂풍풆풔) Operating Profit Margin is a profitability ratio used to calculate the percentage of operating profit a company produces from its operations, prior to deduction of taxes and interest charges Operating Profit Ratio Operating Profit Ratio = (퐎퐩퐞퐫퐚퐭퐢퐧퐠 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬) Return on assets (ROA) is a kind of profitability measure used to determine returns on assets relevant when compared across the companies or previous performance of the company Return On Asset = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐀퐬퐬퐞퐭퐬) Return on equity (ROE) is a measure of financial performance calculated by dividing net profit by average shareholders' equity ROE = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐄퐪퐮퐢퐭퐲) Return on capital employed is a profitability ratio used in valuation of company’s financial position depicting the return out of capital employed ROCE = 퐄퐁퐈퐓/(퐂퐚퐩퐢퐭퐚퐥 퐄퐦퐩퐥퐨퐲퐞퐝) Return on investment is a profitability measure used by businesses to identify the efficiency of business in generating return out of an investment ROI = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐂퐨퐬퐭 퐨퐟 퐈퐧퐯퐞퐬퐭퐦퐞퐧퐭) Ratio analysis refers to the analysis and interpretation of the data collected from the financial statements (i.e., Profit and Loss Statement, Balance Sheet and Fund/Cash Flow statement etc.) Thank You for Watching DevTech Finance
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Financial Statement Analysis Lecture1 1
1.
FINANCIAL STATEMENT ANALYSIS
BY SYED MUHAMMAD IJAZ, FCA AUGUST 03, 2007
2.
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Profitability-Expenses Ratio
15.
Profitability-Expenses Ratio-Continued Represented
as a %age to Net Sales Lesser the margin/%age better it is
16.
PROFITABILITY RATIOS RELATED
TO INVESTMENTS-RETURN ON INVESTMENTS(ROI)
17.
RETURN ON CAPITAL
EMPLOYED
18.
EARNING PER SHARE
19.
DIVIDEND YIELD
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DIVIDEND PAYOUT or
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CURRENT ASSETS TURNOVER-CONTINUED
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