Professional Documents
Culture Documents
GRP 2
GRP 2
WINTER
RATIO ANALYSIS
Template
●
WINTER
Snapshot of a company's financial condition
Template
It presents an enterprise’s assets, liabilities,
and equity at a point in time
SHEET ●
It represents a single moment in time
●
It represents a period of time
●
It shows how changes in balance sheet and income accounts
CASH FLOW ●
affect cash and cash equivalents.
Determine Short Term Viability of the company
It includes only inflows and outflows of cash and cash equivalents
STATEMENT
●
To workout To workout
short-term
financial
the
position profitability
To workout To workout
the operating the
efficiency solvency
To simplify Helpful in
the analysis of
accounting financial
comparative
information statement
analysis of
the
performance
BALANCE SHEET RATIOS 11
Quick(Acid
Current Working
Ratio Test )Ratio
Capita Ratio
13
WINTER
INCOME STATEMENT RATIOS
The case of
Motorola
15
Personal
Commun
ication
Segment
Global
Telecomm
unication
Segment
Broadband
Communic
ation
Segment
Commercial
Government
& Industrial
Segments Semicon
ductor
Product
Segment
Integrated
Electroni
c System
Segment
LIQUIDITY RATIOS 16
CURRENT RATIO:
Total current Assets / Total
Current Liabilities
Inventory
Turnover 6.25 6.01 5.66
Ratio
Fixed Asset Turnover Ratio 22
Total Asset
Turnover Ratio 0.86 0.61 0.90
24
• Motorola manages its inventory quite
efficiently as its ratio is better than both
industries.
• Motorola uses its total assets slightly
less efficiently than the average firm in
the telecommunications equipment
industry.
DEBT RATIOS 25
WINTER
Debt ratios checkTemplate
the financial structure of
the business by comparing debt against total
capital, against total assets and against
owners' funds
(FEASIBLE=1)
Debt to
1.77 0.52 1.82
Equity Ratio
DEBT ASSET RATIO 28
29
WINTER
DEBT CAPITAL RATIO
Template
A measurement of how leveraged the
company is.
A high debt to capital ratio indicates that
a high proportion of company’s capital is
comprised of debt
Profitability Ratios 30
• A class of financial indicators that are
used to assess a business's ability to
generate earnings as compared to its
expenses and other relevant costs
incurred during a specific period of
time.
• In short these ratios relate profits to
sales and investment
31
Profitability ratios
Net profit
-9.31% -3% -1.24%
margin
Profitability in Relation to
Investment
34
• Return on Investment (ROI) =
Net profit after Taxes
Total Assets
• Motorola is deficient in its ability to generate
profits from its sales.
CONCLUSION
40
• Analysis of a firm’s :
1) Financial position
2) Business risk
3) Kinds of funds required
• Comparative analysis
• Thus ratios are very important
Points to keep in mind 41
WINTER
•Industry averages, not benchmarks
Template
•Not use the rule of thumb indiscriminately
•Kind of business very important
•Standardize the ratios
•Seasonal character of business
•An analysis over time
ECONOMIC CHARACTERISTICS AND
STRATEGIES
42
• Reflect industry trends and products
• Competitive strategy
e.g. specialty foods vs. supermarkets
• Influence on product life cycle
By Savich and Thompson
Start up, growth and harvest
Limitations
To sum up… 43
• Insight into firm’s analysis and
performance
• Various aspects of firm’s operations
• Comparative analysis
• Very essential financial tool
44
Thank You