The other techniques include:. This article talks about accounting ratios in detail. And how different ratios are sued to analyze varied financial statements. Accounting ratios are one of the important tools of financial statement analysis. These showcase a relationship between two or more accounting numbers that are taken from the financial statements. Further, such ratios are expressed either as a fraction, percentage, proportion or number of times. The accuracy or efficiency of accounting ratios as a financial statement analysis tool rests on the financial statements.
This is because while calculating a particular financial ratio, the two or more accounting numbers used are taken from such statements. Also, the accounting numbers used to calculate ratios should have some relationship between them. A financial and industry analysis for Motorola Corporation was undertaken to understand the financial position of Motorola in the year vis-a-vis its competitors. This analysis was undertaken using financial ratios. However, this study was done for only two segments in which Motorola operates.
These include Semiconductor Industry and Telecommunication Industry. The various ratios calculated were as follows:. When Motorola was compared with the other market players in the semiconductor industry for various components, following outcome was seen:. Similarly, ratios were worked out for Telecommunication Industry players and the same was compared with the financials of Motorola.
Therefore, the above case study explains the relevance of accounting ratios in analyzing the financial statements of a company. Typically, the accounting ratios are classified based on the purpose for which a particular ratio is calculated. Accordingly, ratios can be classified into following categories:. Liquidity ratio analysis helps in measuring the short-term solvency of a business.
Liquidity suggests how quickly assets of a company get converted into cash. Further, it ensures uninterrupted flow of cash to meet its current liabilities. Also, liquidity of a company indicates whether it has sufficient funds to meet its day-to-day business operations. A current ratio lower than the industry average suggests higher risk of default on the part of the company.
Likewise companies having too high a current ratio relative to the industry standard suggests that they are using their assets inefficiently. Quick ratio is a more cautious approach towards understanding the short-term solvency of a company. It includes only the quick assets which are the more liquid assets of the company.
Such a ratio indicates the ability of the company to meet its short-term debt obligations using its most liquid assets. This ratio ascertains the time period for which the company can continue to pay off its expenses. Therefore, a higher defensive interval ratio suggests greater liquidity. Cash conversion cycle determines the time period that transpires from the point when working capital is invested till the time cash is collected by the company.
Therefore, lesser the time period between cash inflow and outflow, higher the liquidity. Overall it becomes confusing if I take it from a database.
Hi Dheeraj, What u r doing is incredible. Helping students and professionals to reach their goals. I salute u sir. It would be a great help if u can please provide the spread sheet. Hi, Very usefull article Can you please provide me with the Excel templates? Thank you very much! Great works from you. Could you please email me the template so that i can understand this a bit better. Hi Dheeraj good day its amazing Could you please email me the template i already bought the 99 courses online,non of them listing the full ratio analysis thanks. For calculating debt to equity, numerator should contain only the Debt part.
The numerator is actually net debt. In this case, we assume that cash can be used to pay a part of the debt. Hi Mr. Dheeraj, what a great work!!! It would be great if you could send me the excel spreadsheet. Hi Dheeraj, The article mentioned on ratio analysis is very useful and practical. Would really appreciate the career guiding feedback. Hi Pradeep, I think since you are already working with a leading bank in India, guess your work experience and growth within the bank will take you to the higher level.
This is amazing with a lot of simplicity. This content on financial ratios is best I have come through in internet, One thing I did not understand is whats the difference between credit sales and account receivables. Both numbers represent one same thing is that payments would be received by company in future. So what is different.
Ratio Analysis of Financial Statements (Formula, Types, Excel)
Credit Sales leads to accounts receivables. Accounts receivables is basically a cumulative credit sale which is yet to be recovered to date. Also, assume that none of the credit sales were recovered as cash. Thank you so much for your great effort. I really appreciate the valuable sources that you have shared with us. This blog is incredible, and you are just amazing. By the way, could you please send me the Colgate Ratio Analysis Excel Template both solved and unsolved ones? Again, thank you so much for your contribution and your guidance. Hi, unfortunately, i do not have much material related to CMA Exam.
Hi Dheeraj, Can u plz send me financial statement analysis templates as well as working notes. Hi Dheeraj, usefull article and comments. Thank you so much. Have a nice day Dheeraj. Hi Dheeraj, Many thanks for this article! Please share financial analysis solved and unsolved templates. Good morning Dheeraj, thanks for the great effort you are putting in to help some of us.
I would be most grateful if you could send me the templates. HI Dheeraj, thanks very much for this great work, i would be most grateful if you could send me the solved and unsolved template. Dear Dheeraj, Thank you very much for such an extensive guide! Also could you please tell some database where it is possible to find financial statements of the company, if it is not public. Thank you for your answer in advance. If the company is not public, then very difficult to get the details for free.
Great lesson, can you send me solved and unsolved templates. Great work. Please, can you email me the excel template. Thanks a million. It is almost impossible to come across people like yourself who is equipped with greatest knowledge yet so humble and hardworking in sharing this great wealth. I admire your hardwork and knowledge. You are great. Hellow Dheeraj, Thanks for this tutorial, it is very useful! I would like to know if you have the supporting models too? I did not find them on this page. I would like to have for my own practice and consumption.
I will be grateful if you kindly share the solved and unsolved versions of these models. Best regards, Ravi. Have been searching for sth like this for long. This guide is really the most comprehensive. And can I please have the excel template? This is an excellent tutorial.
Very easy to understand and easy to navigate. Thank you for your generosity. Please send me the Excel templates I would really appreciate it. Great work, very useful and explained very succinctly. Please may I have a pdf version of the explanations and interpretation of the ratios? Very much appreciated the commentary etc. Kindly requesting you to e-mail me the Excel templates including calculations please.
I had my 1,5y internship at investment banking and your lessons here were more usefull than those over that period. Many thanks and Congrats for your job that enables us not only to perform better at this industry but also to get a deep joy of doing this job. Hi Dheeraj, very usefull post. To validate them with Excel, would you please send me the file?
Have a nice day. This is amazing work. Could you please send the financial analysis template. Would you have a modeling template too that links all 3 statements or just Income Statement. Thanks for providing this. Please check your email for the same. For the linking of the 3 statements, please check this free financial modeling training colgate case study. Its always a pleasure to visit your site to get some good inspiration on what books to read.
Could i request for the financial analysis templates. Hi, Thank you for this tutorial, I find it very useful! I just would like to ask where is the model have you calculated the ratios? I did not find them anywhere. I wou;d like to make a comparison with mine which I have worked on the unsolved version.
And I have some more questions. Hi Mariya, i have sent you both the solved and unsolved excel sheets. Please let me know if you have any questions. Hi Dheeraj : i am a finance professional myself, and i find this outstanding and amazing. Thank you so much in advance. Hello Dheeraj Vaidya, Undoubtedly, you effort is worth being appreciated.
I am not being able to download the templates of financial ratio analysis. Hello Dheeraj, Thank you very much for sharing your research here. Many students like me who have interest in financial modeling get to learn a lot of things from this blog. But for practice i am unable to download the templates. Can you please send me the templates on my E-mail ID.
Excellent post Dheeraj. Kudos to your hard work in educating fellow professionals. Thanks a lot..! Hi George, thanks for the appreciation. I do not have the pdf version. Dear Dheeraj, Your piece of work is one of the finest, simplest and most comprehensive one. Very easy to understand and apply. Please keep up your good work. Can you please send me the unsolved and solved excel sheet to complete my learning since I am unable to download the same from site.
Hello Mr Dheeraj,again amazing work from you. I am student and i want to ask you an analyst question. May God bless you!! Hi Dheeraj, Thank you very much for sharing. Could you please send me all the Excel Templates together with pdf to my email. Hello Dheeraj, can you kindly forward me the documents, i will really appreciate it.
Tried downloading the files you posted on the site, but its not just downloading. Can u check if Did correct ratio calculations , I can send you my work Interpretation I am learning how to write, if you can , it would be great. Awesome explanation,I must say you have really put in some great effort for explaining jargons of fundamental world.
Thank you so much and look forward to more of knowledge sharing articles from you. It would be great if you can send over templates on my email id. This is fantastic. I remember doing financial modeling module at corporate bridge with you guys. The training modules listed at Wallstreetmojo look interesting. Looking forward for learning some new modules. You need to check the management discussion and analysis section for details of such exceptions items if included. Hi Dheeraj your article was very useful to brush up basics of financial ratios and their applicability.
Please do share Excel templates. Apart from above, Dheeraj i would like to know how can i connect to you for any other future references. Hi Piyush, thanks! You will find my contact details in there. This kingsley from Zambia liked and enjoyed your article. Kindly send me if possible Ratio analysis solved and unsolved.
16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses
Thanking you in advance. Hi David, thanks! To break into IB, you need to master Excel, accounting, Financial modeling and valuations. If you are relatively new to accounting, a good place to start is this finance for non finance tutorial. Thereafter, you can pick this Ratio analysis case study to understand the analysis part of accounting.
For financial modeling, you can refer to this step by step guide to Financial modeling in excel. Try to practice this too. Nice article, please send me the templates adeniyiasa gmail. Could you plz send me these ratios in Excel formats. I will be very thankful. This page has really been a blessing. You have done a marvellous job! Could you please send me all the excel as well. The email download buttons seems to have an issue. Hi, useful article. Please send me the excel template at your convenience. Thanks and Best Regards,. Hi Dheeraj, Very useful article. Could you please send to me the financial analysis templates?
Really amazing templates will be of great use and benefit to me. Please may you send all templates to me. Amazing stuff. Can you send me all updated templates along with the financial analysis temp. Thanks again. Hi can you please send me the ratio workbook. I learned a model complete from you and now I model on my own business. Thank you that was really helpful.
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Excellent, really appreciate the efforts made by Dheeraj Vaidya…. Somehow its not working through download mode. Hi Dheeraj, usefull article and excellent study. This is a very comprehensive paper. Is this available in word or pdf? Also, can you please share the various excel files.
Hi, Could you please send me the templates to my email, and all the ratios , and if can any information related to this subject, its great work thank you Dr. Mohammad Al-Afeef. Hello Dr. Mohammad Al-Afeef, please check your email. Have sent the financial analysis excel sheets. Hi Dheeraj, This is a very useful article and comments. May you please send me the file as I am failing to download. Amazing explanation Dheeraj. Thank you alot. May i have a copy of the templates plz as well. Many thanks for the wishes Apoorv. Please check your inbox for the templates.
Best, Dheeraj. Hello Dagestan, Really insightful work. Please share both templates and guide. Would appreciate such an amazing work on cash flow statement.
Will try and make one on the Cash Flow statements too. I have sent the templates to your id. Thanks Mohammed. I have sent the ratio analysis templates to you. Could you please share with your ratio template? Thank you in advance. Hi Dheeraj, your posts are too good for a beginner to understand. I would like to have the excel template to have more meaningful insight. Your posts helps me alot and keep up your good work..
Good Day. Hi Dheeraj, you are really helping the financial aspirants. Can you please send me the file Solved and Unsolved excel? Hi Dheeraj, Your post is awesome with very strong explanation. You are doing a great work. Hey Dheeraj, This is very useful indeed. I work as an auditor and my work requires a great deal of analytical skill…I am even considering Financial analysis courses…. Hi Dheeraj, This is a very good spreadsheet and will prove very useful for our trainees. Please could you email me the spreadsheet?
Hi Stuart, please check your inbox for the ratio analysis excel sheet. Have just emailed you the same. Hi Dheeraj,great job and I hope to get these kind of articles going forward as well. Can you please send the file to my mail. Great Work. Thanks for this. I can totally see the number of hours you must have spent to get this done. Can I also get a copy of the excel template. This is certainly an outstanding work. Thank you for sharing it. Would you mind sending me the template? Hi Leonardo, thanks for the encouragement.
Have just send the ratio analysis files at your inbox. Dear Dheeraj, Good job, deep explanation! Many thanks! I have happy to see that this ratio analysis guide was useful. Have sent the excel files at your email.
Hi Dheerja, really nice job! Could you send me the templates? Thank you in advance! This was a wonderful article and became easy learning for me. Could you please share those templates with me so that i could benefit form it even more. Really a Great stuff and thank you for your patience for very clearly explaining FS analysis in great detail. I have emailed you the financial statement analysis excel sheets. Cash and Cash equivalents has increased from 4. Why a built-up of cash? This above is one of the many questions one must ask while doing vertical analysis.
Could you guide me on how to answer this and other such questions? We need to go deep into the annual report to find out the reason for the same. Best place to start with is the Management Discussion and Analysis section. In this they do discuss the variations, growth figures etc. Hi Dheeraj, thanks for this excellent study. Helped me learn some new approaches. Wold you be able to email me the template? Hi Ruth, glad that you liked the material and found this useful.
Please check your inbox for the details. Hi Dheeraj Excellent work, Could you please send me the template both solved and unsolved and PDF for this lesson on my email? How are you? Great stuff and thank you for your patience for expalianing FS analysis in great detail. Excellent work and Knowledgeable content,you have made an outstanding effort to describe these ratio analysis.
Thanks for sharing your wonderful analysis. May I request excel templates for ratios and PDF for this lesson? Hey Wendy, many thanks for the appreciation. Have sent the templates of ratio analysis to you. Hi Dheeraj, You have a gift! I stumbled on your site during work hours some look at TMZ, I look at finance websites and I had to get back to my job so as not to cheat my clients. May I too have the practice template? Thanks, Erik. Thank you for sharing that kind of information. It is indeed helpful. Please be kind to share with me the template.
Many thanks. Very Very well explained. Thanks for taking the time. Would you please send the templates, would be useful for me. Very nice and good work and will be very helpful. Kindly send me the solved and unsolved templates. This is awesome. I would like to know whether is there any template regarding with efficiency ratio of the bank. Sir, do you mind send me this template soved and unsolved. Thanks Nur for the appreciation Will prepare one on it soon.
Have sent you the financial anlaysis templates. Thanks Sothea. However, i have emailed you the excel ratio templates. Excellent job,. Thank you for making this concept so easy.
Excellent work. May I request you for the excel templates for practice. Amasing work Dheeraj! So well and clearly explained. I would really appeciate if you could send me the templates. Many thanks in advance! Very useful and informative template.. Hi, wonderful material and information you compiled here, congratulations. Can you send me the excel and all material, or send me the link for me to download it?
Hi Alessandro, thanks for the appreciation. Have sent the financial analysis excel at your email id. I rally like how you split it into the 3 methods. I would be grateful to receive the templates and guide. Brilliant work here Sir. God bless you for the effort. Would appreciate if you send to me also please. This whole thing, this is so kind of you.
Could you please send me the financial analyses template, please.
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Wish you all the best. Hello sir…. Thanks for sharing this article… It is very helpful in understanding a complex topic… Thanks a lot.. It maybe have different interpretation in concept for measuring, I think. But to measure the operating cash folllow enough or not covering the debt payment in 1 year, EBITDA may be a better indicator on operating cash flow. How do you think? Hi Alex, you are right! I have resent you the templates. Thank you soo much for this great explanation. Actually I got a job last week in a corporate banking sector which is all about this lesson.
I appreciate what you have done. God bless you. Please mail it to me. Thank you for that analysis, Kindly send me that comprehensive guide on the financial analysis. Its so thorough and detailed. Its very helpful for the entry level Financial analysts those who have strong passion to do. Hello Sir, I would like to have this material in a downloadable form. Also, I am from Nigeria, is it possible to pay for your courses using a Nigeria debit card? Many thanks in advance. Just that while registering and making payment, please choose 2checkout option. Thanks for this wonderful presentation, need to move on to the financial modelling.
Good job. Could you please send me the template? Will definitely connect with you directly. I am glad you found this useful. Have shared the financial statement analysis template in your email id. Awesome work!! Really super helpful. Would really appreciate if you could send me the excel template for this. Done all of these analysis techniques but yours brings it together very nice and neat. Great job. Would you be so kind to send me the templates? Hi Dheeraj, great portal, the content is very well graphically designed.
I found some unanswered queries from your blog. Thanks for the great work and for sharing. Please kindly send me the Ratio Analysis Solved and Unsolved. Thank You. Thanks for this great analysis. Please send me the Excel template. I love how you have simplified everything! Thanks could you please send me the solved and unsolved template. This is a wonderful and comprehensive insight into ratio analysis. Kindly mail me the excel template. Can you send me the solved and unsolved templates please? Hi Dheeraj Vaidya, Excellent and you have made an outstanding effort to describe these.
Thank you very much. Thank you Mr. Dheeraj for this fantastic post. This is helping us alot in our endeavors in knowing the fundamentals in investment strategy. Your continuous sharing of knowledge is highly appreciated. Thank you sir. Dheeraj Vaidya Saheb. Financial ratios can be broadly classified into liquidity ratios, solvency ratios, profitability ratios and efficiency ratios also called activity ratios or asset utilization ratios.
Other categories include cash flow ratios, market valuation ratios, coverage ratios, etc. Liquidity ratios are particularly useful for suppliers, employees, banks, etc. Important liquidity ratios are:. Solvency ratios assess the long-term financial viability of a business i. Information about solvency is critical for banks, employees, owners, bond holders, institutional investors, government, etc.
Key solvency ratios are:. Profitability ratios measure the ability of a business to earn profit for its owners. While liquidity ratios and solvency ratios explain the financial position of a business, profitability ratios and efficiency ratios communicate the financial performance of a business. Important profitability ratios include:.