Skip to main content

MBA NOTES:RATIO ANALYSIS

RATIO ANALYSIS

A company's financial information is contained in 3 basic financial statements the balance sheet, the trading and profit and loss account and profit and loss appropriation account. These statements are very useful to different parties concerned such as management, creditors, investors and so on. These statements may be more fruitfully used if they are analysed an interpreted to have an insight into the strengths and weakness of the firm.
Analysis of statements means such a treatment of the information contained in the two statements as to afford a diagnosis of the profitability and financial position of the firm concerned. In the analysis of financial statements, the analyst has variety of tools available from which he can choose those best suited to his specific purpose.
The most important tools used now days are ratio analysis, fund flow analysis and comparative and common size statements.

Ratio Analysis
Ratios are well known and most widely used tools of financial analysis, A ratio gives the mathematical relationship between one variable and another, Accounting ratios are relationships, expressed in quantitative terms between figures which have a cause and effect relationship or which are connected with each other in some manner or the other. The analysis of a ratio can disclose the relationships as well as bass of comparison that reveals conditions and trends that cant be detected by going through the individual components of the ratio.
The usefulness of ratios is ultimately dependent on their intelligent and skilful interpretation.



MBA NOTES
MBA
Labels:

Comments

Post a Comment

Popular posts from this blog

CAPM MODEL (CAPITAL ASSET PRICING MODEL)

According to this model company have to face two main types of risk. Risk= Systematic + un-systematic Systematic Risk: The risk face by the company due to its external environment is called systematic risk. This risk cannot be controled by the company. Example: Pocitical instability, war in the country, energy crises in the country etc. Un-Systematics Risk: The risk face by the company due to its internal environment is called un-systematic risk.This risk can be conroled by the company. Example: shortage of employees, Clash between the management etc. CAP MODEL: A model which shows the relationship between the systematic return and not shows un-systematic. _ R = R f + ( R m - R f) x    β (beta) _ R = Return (expected) R f = Risk free Return The minimum return which is desire by the investor R m = Market Return The return which is provided by the market β = systematic Risk Note = when minimum then always keep the Rf value less and Rm val...
Post a Comment
Read more

TYPES OF INDEX

INDEX Index is a number which show the selling and purchasing behaviour of the security on a perticular day. it also show the economy position. Types of Index Don Jone Index30 Standard 500index KSE-100 Index Don Jone Index30: (blue chip) This index shows the selling and purchasing behaviour of the top 30 companies of a country if this index decline then it provide the negative signal to the international market about the economy of the country. blue chip: top 30 companies that have high market share. Standard 500 index: This index show the 500 countires selling and purchasing behaviour. KSE-100 Index: This index show the 100 comapnies selling and purchasing behaviour (top + middle + low level) INVESTMENT AND PORTFOLIO MANAGEMENT INVESTMENT VS SPECULATION AND GAMBLING TYPES OF INVESTOR INVESTMENT COMPANIES TYPES OF MUTUAL FUNDS TYPES OF BONDS FUNDS MONEY MARKET FUNDS SECURITIES MARKET TYPES OF INDEX TYPES OF BROKERS BROKER'S ACCOUNT MAR...
Post a Comment
Read more

RISK PORTFOLIO ANALYSIS

RISK PORTFOLIO ANALYSIS For risk analysis we use the correlation and we check the variable dependable or nondependable each others. Rules: If variables answers will be (+ve) then variable dependable or if the variables answer are (-ve) then nondependable. (+ve) risky protfolio (-ve) less risky protfolio Correlation: It show the relationship between two or more than two variable If the answer of the correlation is positive it indicate that the securities in the portfolio are depend on each other and this protfolio is a risky portfolio. If the answer of correlation is negative it indicate that the securiteis in the protfolio are not depend on each other and this protfolio is called less risky protfolio. Example: A group securities       NBP , Nestle     answer (+0.05) B group Securites       Lucky, NBP      answer ((-0.03) Decision: risk taker will choose option A risk avioder will choose option B S.D = ri...
Post a Comment
Read more