The profitability of the firm is also measured in relation to investments. The term investment may refer to total assets, capital employed or the owners' equity. The efficiency of an enterprise is judged by the amount of profits. But sometimes the conclusion drawn on the basis of profit-to- sales ratios may be misleading. Because it is possible that profit in [...]
Here is a list of some important financial ratio formulas. 1. Current Ratio = Current Assets/Current Liabilities 2. Net Working Capital Ratio = Net Working Capital/Net Assets 3. Quick Ratio = Quick Assets/Liquid Liabilities 4. Cash Position Ratio = (Cash + Marketable Securities)/ Liquid Liabilities 5. Proprietary Ratio = Shareholders’ Fund/ Total Asset (or) Total Resources 6. Solvency Ratio = [...]
In this article we will discuss about the classification of combined ratios in accounting. They are:- 1. Activity Ratios or Turnover Ratios 2. Profit Cover Ratios. 1. Activity Ratios or Turnover Ratios: This category of ratios includes those ratios, which highlight upon the activity and operational efficiency of the business concern. The funds of creditors and owners are invested in [...]