Business finance Essay

Submitted By aqib0100
Words: 2240
Pages: 9

Contents Page No

1) Definition of financial ratios……………………………………………… 1
2) Types of financial ratios…………………………………………………...1
3) Methods and formulas of ratios…………………………………………….1
4) Financial statement analysis of Sapphire Textile mill ltd…………………..2
5) Ratios calculation of the Sapphire Textile mill ltd…………………………3
6) Calculation of liquidity ratios of the Sapphire Textile mill ltd..........………3
7) Calculation of Activity ratios of the Sapphire Textile mill ltd ……………..3
8) Calculation of Profitability ratios of the Sapphire Textile mill ltd…………3
9) Calculation of Leverage ratios of the Sapphire Textile mill ltd……………..3
10) Ratios calculation of the Textile Sector over all……………………………..5
11) Calculation of liquidity ratios of the Textile Sector over all..........………..…5
12) Calculation of Activity ratios of the Textile Sector over all..........………..…5
13) Calculation of Profitability ratios of the Textile Sector over all....………..…5
14) Calculation of Leverage ratios of the Textile Sector over all..........………..…5
15) Trend analysis of the liquidity ratio of the sapphire mill and over all sector…6
16) Trend analysis of the Activity ratio of the sapphire mill and over all sector…8
17) Trend analysis of the Profitability ratio of the sapphire mill and Over all sector……………………………………………………………...…10
18) Trend analysis of the Leverage ratio of the sapphire mill and over all sector.11
19) Capital management…………………………………………………………..12
20) Receivable management………………………………………………………12
21) Cash management……………………………………………………………..13

Financial Ratio or Accounting ratio:

Financial ratio of accounting ratio is the relative magnitude of two selected numerical values taken from an enterprise's financial statement. Other used in accounting. There are many standard ratio used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a time, and by firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in carious companies. If share in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.
There are different types of financial ratios.
1) Liquidity Ratio.
a) Current ratio.
Current ratio is equal to current assets divided by current liabilities
b) Acid test Ratio.
Acid test ratio is equal to current assets minus inventory plus prepaid expenses divided by total liabilities.
c) Absolute Ratio.
Absolute ratio is equal to cash plus bank plus marketable securities divided by current liabilities.

2) Activity Ratio
a) Receivable turnover ratio.
Receivable turnover is equal to net sales divided be receivable.
b) Inventory turnover.
Inventory turnover is equal to cost of goods sold divided by inventory.
c) Payable turnover.
Payable turnover is equal to credit purchase divided by payable.

3) Profitability Ratio.
a) Gross profit to sale ratio
Gross profit to sale Ratio is equal to gross profit divided by sale time 100
b) Net profit to sale ratio.
Net profit to sale ratio is equal to net profit divided by sale time 100
c) Operating Ratio.
Operating ratio is equal to cost of good sold plus operating expenses divided by sale.

4) Leverage Ratio
a) Debt to equity Ratio
Debt to equity ratio is equal to total liabilities divided by total equity time 100.
b) Debt to total Assets Ratio.
Debt to total assets ratio is equal to total liabilities divided by total assets time 100.
c) Capitalization ratio.
Capitalization ratio is equal to long term liabilities divided by total equity.

Definition of 'Working Capital Management' Working capital (abbreviated WC) is a financial