Ratio Analysis es z Current Ratio Liquidity Ratio ———> bed “—~ Quick Ratio a Debt Equity Ratio TOL/ANW Ratio Interest Coverage Ratio DSCR Return Ratio » Return on Capital Employed al on Asset ® Return on Faouitw “ Leverage Ratio ——— Solvency Ratio ———>Liquidity Ratios oe These ratios carry great importar analysis, especially in the context Af examination of a proposal for = working capital credit rn tase wernt’ capital ee are treated as shortterm credit requirements and a banker needs to examine whether the loan is. likely to be repaid on ee if fi YB tries possivie oniy ir the rent assets)are iguid enough and whether th .eds of thé currenasSets are adequate to repay the dues of the bank on demand. Liquidity ratios therefore indicate an relationship between current assets and current liabilities of an enterprise. illLiquidity Ratios 3» Liquidity ratio are of two types i, Current Ratio: It indicates Short terin liquidity of a firm and is widely used by credit analysts. a Current Ratio = cient Keaetae Current LiabilitiesaE CURRENT LIABILTIES CURRENT ASSETS. i. Bank Working Capital Limits such i. Cash & Bank Balance, as CC/OD/Bills/Export Credit ji, Marketable/quoted Govt. or other securities, li, Sundry /Trade Creditor / Bills lil, Bills Receivables/ Book Debts/Sundry Debtors upto Payable, Short duration loans or 90 days (180 days for MSMEs), deposits iv. Stocks & inventory (RM,SIP,FG) iii, Expenses payable & provisions Stores & Spares, against various items Advance Payment of Taxes, i. Prepaid expenses, Loans and Advances recoverable within 12 monthsLiquidity Ratios > } Liquidity ratio are of two types : ow sell So ii, Quick (or Atjd Test) Ratio: It indicates iiguilty of a firm in very short peridc/n other words we can explain it as the mast liquicl components of the-cuent assets to meet the cur ities on demand in emergency situation. a Quick ratio= Current Assets ~ inventories Current Liabilities - Bank Borrowings ee Here, Inventor are the led quid of all the individual components of Current Assets and amount involved under this head comes from Bank Borrowing,