What is Ratio Analysis?
It is a quantitative analysis. The information which a financial statement conveys is converted into quantitative terms with the help of ratio analysis. It is helpful in estimating a company’s performance in terms of efficiency, solvency and liquidity. These ratios are helpful in improving the growth of a company and figuring out any problems and areas of its improvement.
It is important for the students to know about the different uses of ratio analysis. We have professionals who provide expert guidance to complete your homework. For Ratio Analysis homework help, visit us at helpmeinhomework.
Classifications of Ratios
There are four groups in which ratios are classified:
- Liquidity Ratios
- Solvency Ratios
- Activity Ratios
- Profitability Ratios
What is Liquidity Ratios?
It is used to find out the ability of the firm to meet its short-term obligations. Continuous default can lead to bankruptcy.
Our experts explain different types of ratios with the help of relevant examples. This helps them to understand the uses of the various ratios well. We provide best Ratio Analysis assignment help. Let’s briefly discuss the four types of liquidity ratio-
- Current ratio- it is used to establish the relationship between current assets and current liabilities. If current ratio is high, greater will be the margin of safety to meet the short term
Current ratio = current assets (CA) / current liabilities (CL)
- Quick ratio- it is also called liquid ratio. It is used to establish arelationship between quick assets and current liabilities. Quick assets mean the assets which can be quickly converted into cash.
Quick Ratio = Quick Assets(QA) / Current Liabilities (CL)
- Absolute cash ratio- it shows the relationship between cash & marketable securities and current liabilities.
Absolute cash ratio = cash & marketable securities / current liabilities
- Internal interval measure ratio- it measures the relationship between quick assets and average daily operating expenses.
Internal interval measure ratio = quick assets / average daily operating expenses
We ensure the proper understanding of each term to the students and help them get good grades in exams. There are some precautions which must be taken care of while calculating ratios. Our experts guide the students and provide best Ratio Analysis homework help online.
Types of Solvency ratios
Another classification of ratios are solvency ratios which are further divided into the following-
- Equity or Debt ratio
- Capital gearing ratio
- Total assets to debt ratio
- Preference dividend coverage ratio
- Proprietary ratio
- Interest coverage ratio
- Debt-service coverage ratio
Solvency ratios are helpful in finding the ability of firms meeting their long-term obligations on the due date. Thus, the aforesaid ratios are being used by the firm to get information on the relationships between various debts. To know the formulas and proper understanding of these ratios, visit us at helpmeinhomework.com. We will be happy to provide Ratio Analysis homework help.
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