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Methodology

# Methodology

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04/12/2012

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METHODOLOGY
In this project titled “Financial Analysis of
Quasem Drycells
Ltd.”, I have followed the method
called Time Series Analysis. I have shown different financial analysis in different times andcompared them with each other to have the best results in my analysis.
Limitations

Companies are not exactly alike in the nature of their operations.

Different companies use different accounting policies.

Ratios are primarily a starting point from which to identify further questions related topresent position & future directions of the operations and so they do not provide answersin themselves.

A single ratio can mislead the users.

“The financial statements being compared should be dated at the same point in timeduring the year”.

Audited financial statement should be used to analyze ratios.

Time series analysis ignores the impact of inflation.

Literature Review
Liquidity Ratios:

Current Ratio = CA / CL

Quick Ratio or Acid Test or Liquid Asset Ratio = (CA
–
Ending Inventory) / CLDebt /Gearing/ Leverage Ratios:

Debt/Equity Ratio = Long-term loan * 100 / Stockholders equity

Debt Ratio = Total Liability / Total Asset

Times Interest Earned Ratio or Interest Coverage Ratio = EBIT / InterestActivity (Efficiency) Ratios:

Inventory (Stock) Turn over = Cogs / Av. Inventory

Average age of Inventory or Stockholding Period = (Av. Inventory * 365) / Cogs

TA Turnover Ratio = Sales / TA

FA Turnover Ratio = Sales / Net FAProfitability Ratios:

ROCE= EBIT * 100 / (FA + CA
–
CL)

Net Profit Margin= (Net Profit * 100) / Sales

Operating Profit Margin= (Operating Profit * 100) / Sales

Gross Profit Margin = (GP * 100) / Sales

ROA= (Earnings Available for Common Stock Holders * 100) / TA

ROE= (Earnings Available for Common Stock Holders *100)/Stockholders Equity

EPS= Earnings Available for Common Stock Holders/ Number of Common Stock OutstandingMarket Ratio:

P/E Ratio = Market Price / EPS

Quasem Drycells Ltd.
Findings andAnalysis