2Course TopicsHow to do ratio analysis for financial statements?Financial statement analysis use ratio analysis formulas to draw a meaningful interpretation of the data given in financial statements. This analysis helps investors to adopt a user-oriented approach rather than traditional proprietary approach. Considering the various types of ratios help investors to easily obtain the data from some ratios. This course aims to learn how to do ratio analysis for the financial statement. This course first covers the meaning and definition of ratio analysis in the introductory part and next to the various types of examples of financial ratios.A ratio measures the relationship between two financial figures. In this corporate finance world, ratios specify the company's standard performance and help the investors and managers to analyze the operations. The ratios may be classified according to the financial statement on the basic leading categories from which the ratios are derived.Balance sheet ratiosRevenue statement ratiosCombined ratiosThe ratio measures the relationship between two financial figures. Considering an example if there are four cell phones and two calculators, now it can be said that cell phones and calculators are in the ratio of 4:2. This shows that there are four cell phones for every two calculators. In the corporate world of finance, ratios show the performance of companies. Ratio analysis helps the investors and managers to analyze the various ratios and sustainability of the operations.Ratios are used to simplify financial statement ratios. Without understanding the whole financial statement ratio analysis helps the investor to obtain the information of a few data from the ratios.
3Course TopicsDetection of problematic trend the analysis can also forecast the future performance of a company. The profile of the company's business based on the geographical location where the company operates, the category of product and services it provides, target customers, etc. Next isfinancial profile included the size of the company, the upper limit to lower limit, etc. the comparison in between companies through the implication of the ratios and that ratios can be PE ratio, PB ratio.Types of financial statement ratios Liquidity ratios:Liquidity ratios indicate the cash available to business and its ability to meet current dues. Liquidity ratios are an indicator of a company's capacity to clear its current liabilities (liabilities need to be cleared in the year)Liquidity ratio examples are discussed belowQuick ratio = QuickassetsQuickliabilitiesCurrent ratio =CurrentAssetsCurrentliabilitiesFormula: The addition of all the current assets and current liabilities shown in the balance sheet comes to a quick ratio.Solvency ratios
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