Accounting

In order to arrive at a decision or recommendation, analysts required to evaluate the financial performance, position and true value of the company from its financial statements. The role of these financial analysts is to take the published financial report of companies including income statement, balance sheet, statement of cash flow, notes to accounts, supplementary schedules … [Read more...] about Tools and techniques of financial statements analysis

Ratio analysis is designed to reveal financial strength and weaknesses of a company. By comparing company’s ratios to industry standards and competitors. you can easily know whether its financial position has been  improving or deteriorating over the years. Before analyzing financial statements of a company, we suggest you to examine quality of financial data available … [Read more...] about How to calculate debt to assets ratio

Interest coverage ratio measures the creditworthiness of a company by comparing earnings before interest and taxes (EBIT) with the interest. Its a financial ratio that measures company’s ability to make payments for debts. In other words, it gives a better picture to know the short-term financial health of a company. Here is the formula to calculate the ratio: Interest … [Read more...] about How to calculate Interest coverage ratio

In our last article we have discussed about inventory turnover ratio to know how effectively the company is managing its stock of goods to make money. In this article we will show you how to compare inventory to net working capital. In current assets, inventory is considered as the least liquid asset even though company makes money by selling it to customers. To know how … [Read more...] about How to calculate Inventory to net working capital ratio

In our last article we have discussed how to calculate fixed assets turnover ratio. In this article, we wants to measure how well the company has generated sales from its total assets during a particular period. As this ratio is a comparison of company's total assets to the total revenue/sales, its known as total assets turnover ratio. Total assets turnover ratio tells us … [Read more...] about How to calculate total assets turnover ratio -TAT

To find out how efficient the company is at paying to its creditors, suppliers or short term obligations, accounts payable turnover ratio is calculated. Accounts payable is a short term liability shown in the current liability section on the balance sheet. It shows how much a company owes to its suppliers and creditors as at the balance sheet date. It's also known as average … [Read more...] about How to calculate accounts payable turnover ratio

Fixed assets turnover ratio determines how efficiently a company is using it’s fixed assets to generate sales. Its also known as efficiency ratio. Before getting into the calculation part, let us first understand why fixed assets turnover ratio is required. Business owners invest their hard earned money in to the company to get a piece of company’s earnings. Company profit … [Read more...] about How to calculate Fixed assets turnover ratio – FAT

Inventory turnover ratio shows how often the company replaces its inventory or how well the company generates revenue out of its stock of goods. This ratio is most importantly used as a performance indicator in retail and manufacturing businesses. Inventory/stock of goods of a company includes followings: Raw materialsWork-in-progressFinished goods In retail business … [Read more...] about How to calculate inventory turnover ratio – ITR