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Methodology

Methodology

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Published by Nasif Khan Tomal

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Published by: Nasif Khan Tomal on Apr 12, 2012
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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

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