Advantages and Limitations of Ratio Analysis

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Finance Insights and Business
Intelligence

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Table of Contents
Introduction................................................................................................................................3
1..................................................................................................................................................3
2..................................................................................................................................................4
3..................................................................................................................................................5
Conclusion..................................................................................................................................5
References..................................................................................................................................6

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Introduction
In this report the financial analysis in respect of Unilever Plc. will be carried out. This will be
performed with the help of ratio analysis. There will be various ratios that will be calculated
and with the help of them, various areas will be analyzed. The efficiency, profitability,
liquidity and other areas will be taken into account for the purpose of evaluation of the
position and performance of the business.
1.
A ratio is an important approach in which calculation with the help of financial statements
will be made (Delen, Kuzey and Uyar, 2013). The ratios are required to be calculated for
analysis and the same will be performed in the given case. All of the ratios which are required
will be ascertained are represented below.
Liquidity ratios:
Particulars Formula 2017 2018
Current
ratios
Current assets/current liabilities 0.73 0.78
Quick ratio Quick assets/current liabilities 0.56 0.57
Leverage ratios:
Particulars Formula 2017 2018
Debt to asset ratio Total debt/total assets 0.76 0.79
Debt to equity
ratio
Total debt/total equity 3.19 3.84
Profitability ratios:
Particulars Formula 2017 2018
Operating profit margin Operating profit/sales*100 16.49% 24.59%
Net profit margin Net profit/sales*100 12.07% 19.24%
Efficiency ratios:
Particulars Formula 2017 2018
Asset turnover ratios Net sales/total assets 0.89 0.86
Account receivable turnover ratios Net sales/total Account receivable 10.29 7.86