Financial Ratios

Financial data by itself may non pretend the complete picture about a companys achievement and financial well being. It is difficult to evaluate standalone numbers without analyse them to certain norms and standards. Ratios provide a set of standardised parameters which mountain be comp bed across companies. Ratios of a company can be evaluated against industry benchmarks to know the relative position of that company against its peers. at that place are various types of proportionalitys depending on the nature of analysis required. about ratios stair the operational strengths of a company while others measure the financial strength, valuation etc of the company. Profitability ratios Gross profit to sales This ratio presents the gross profit as a percentage of bestow in operation(p) revenues of the company. Gross profit is arrived at by deducting terms of sales from revenues in the slip-up of manufacturing and trading companies. In the case of a service company, the costs incurred for rendering the services are deducted from revenues.The ratio gives the gross margin enjoyed by the products sold by the company and is an indicator of the pricing world power the company enjoys. However, in the case of multi-product or diversified companies this ratio may not give a clear picture.

Operating profit to sales The ratio presents the operating profits as a percentage of operating revenues. Operating profits are profits before stakes and taxes. Thus, the operating margin gives an idea of the profits generated before care and taxes.In addition to being a measure of the pricing power enjoyed by the company, the operating margin also gives a openhanded idea about the efficiency of the company as well. pelf profit to sales The net profit margin is calculated by dividing the net income after taxes by operating revenues. The ratio is a measure of the profits per rupee of sales which accrue to shareholders after settling all external claims. Return on assets as well as called return on investments, this ratio... If you want to get a plenteous essay, order it on our website: Orderessay

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