Professional Documents
Culture Documents
Accounting Ratios
Technique of expressing the relationship between one
accounting result and another to provided a useful
comparison
Liquidity Ratios
Used to measure the short term financial position f a
business firm
Solvency Ratios
To know the paying ability of a firm in the long run. To
assess long term financial position of the firm
Profitability Ratios
To analyse the profitability and earning capacity of the
business
Capital employed
Means long term funds employed in the business
Return on investment
Overall utilisation of funds by a business firm
Working Capital
Capital of the business used in its day to day activities
I
1
RATIOS
LIQUIDITY RATIOS
Current ratio
Quick Ratio
II
1
SOLVENCY RATIOS
Debt Equity Ratio
Proprietary Ratio
Indicates the proportion of assets financed by proprietors'
funds
Compares proprietors' funds with total assets
III
IV
PROFITABILITY RATIOS
Operating Ratio
Return on investment
Objectives of ratios
Limitations of ratios
4. Window dressing
CA - CL
FORMULAE
OTHER POINTS
CA/CL
Quick assets / CL
Debt / Equity
Expressed as a percentage