Unit – 4
Analysis of Financial statements
Ratio Analysis
- Liquidity Ratios - Current ratio
- Quick ratio
- Absolute liquid ratio
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- Solvency Ratios - Debt equity ratio
- Net worth ratio
- Fixed assets to net worth ratio
- Current assets to net worth ratio
- Capital gearing ratio
- Solvency ratio
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- Turn over ratios - Stock turnover ratio
- Debtors turnover ratio
- Creditors turnover ratio
- Working capital turnover ratio
- Fixed assets turnover ratio
- Current assets turnover ratio
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- Profitability Ratios - Gross profit ratios
- Net profit ratio
- Operating ratio
- Expenses ratio
- Operating profit ratio
- Return on capital employed ratio
- Earning per share ratio
- Price earning ratio
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Solved problems on calculation of ratios and preparation of balance sheet using ratios
Cash flow statement
Advantages
- Planning and co-ordination of financial operations
- Control device
- Useful to internal financial management
- Profit and cash position
- Short term financial decisions
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Classification of cash flows:
- Cash flow from operating activities
- cash flow from investing activities
- Cash flow from financing activities
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Solved problems on cash flow statement under method AS - 3
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