Breathtaking Types Of Ratio Analysis With Examples
Based on the purpose the ratios are classified as profitability ratios turnover ratios and financial ratios or solvency ratios.
Types of ratio analysis with examples. Ratio data has all properties of interval data like data should have numeric values a distance between the two points are equal etc. To help identify the short term liquidity of a firm this ratio is used. Types of Ratios based on Traditional Classification Profit and Loss Ratio When we calculate ratio from the two variables which we extract from Statement of Profit and Loss only is known as Profit and Loss Ratio.
Apart from these characteristics ratio data has a distinctive absolute point zero. Ratio data is defined as a data type where numbers are compared in multiples of one another. It has mainly two types of ratio under this.
Ratio Analysis 10 P a g e Other Ratios You may want to develop your own customized ratios to communicate results that are specific and important to your organization. Operating Self-Sufficiency Sales Revenue Total Costs Operating and Social Costs Staffing Costs spent on Target Group Target Staff Costs. Ratio analysis is broadly classified into four types.
For the purpose of analysing the balance sheet and the profit and loss account to compute ratios it is useful to rearrange and redraft them. Ratio analysis can be defined as the process of ascertaining the financial ratios that are used for indicating the ongoing financial performance of a company using few types of ratios such as liquidity profitability activity debt market solvency efficiency and coverage ratios and few examples of such ratios are return on equity current ratio quick ratio dividend payout ratio debt-equity ratio. Here are some examples.
A return ratio is a measure of the net benefit relative to the resources expended. A turnover ratio is a measure of the gross benefit relative to the resources expended. Rearrangement of Financial Statements.
Financial ratios are usually split into seven main categories. For Example Gross Profit Ratio which we derive from Gross Profit to Revenue from Operations. A coverage ratio is a measure of a companys ability to satisfy meet particular obligations.