Ratio Analysis

R.

Christopher

00.12.40.000 EQUITY S CAPITAL 20.000 CASH 2.000 16.00.000 25.000 PREPAID EXPENSES TOTAL CURRENT ASSETS 28.68.000 10% DEBENTURES 16.000 1.00.00.000 TOTAL ASSETS 56.000 TEMPORARY INVST 2.00.00.000 .000 S DEBTORS 3.20.000 64.00.00.000 STOCK 18.000 8.000 RETAINED EARNINGS 4.00.000 4.20.52.40.000 20.60.00.000 21.88.60.000 12.LIABILITIES 3/3/2006 3/3/2007 ASSETS 3/3/2006 3/3/2007 CURRENT LIABILITES 6.000 8.000 3.000 30.

000 1.000 5.20.60.00.000 29.40.60.000 RS 40.000 5.00. 2.000 FROM THE ABOVE FIGURES.000 DIVIDEND DECLARED ON EQUITY SHARES Rs.000 10.20. APPRAISE THE FINANCIAL POSITION OF THE COMPANY FROM THE POINT OF VIEW OF a) LIQUIDITY b) SOLVENCY c)PROFITABILITY .20.PARTICULARS SALES LESS : COST OF GOODS SOLD LESS : INTEREST NET PROFIT FOR 2006-2007 LESS : TAX @ 50% NET PROFIT AFTER TAXES RS 28.

the higher the value of the ratio. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment .class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. the larger the margin of safety that the company possesses to cover short-term debts. Generally.

The solvency ratio measures the size of a company's after-tax income. excluding non-cash depreciation expenses. It provides a measurement of how likely a company will be to continue meeting its debt obligations. . as compared to the firm's total debt obligations.One of many ratios used to measure a company's ability to meet long-term obligations.

000 28.00.PARTICULARS LIQUIDITY RATIO Current ratio = Current Assets / Current liabilities Acid test ratio = liquid asset / Current liabilities 25.000 8.88.000 6.000 720.04 : 1 30.60.00.000 12.000 1.000 640.00.1 : 1 SOLVENCY RATIO Debt equity ratio = Long term debts / S holders fund Interest coverage ratio = EBIT/ Interest charges = .00.52.5 times .12.000 16.000 2006 = 4.125 : 1 = 1.00.000 8.65 : 1 = .000 16.40.000 8.000 24.80.000 2007 = 3.81 : 1 = 1.68.57 : 1 --------------- = 7.

S Debtors.components Share holder¶s fund Current assets Liquid assets Long term loans Equity share capital + Retained Earnings Cash. Prepaid expenses Current assets .(Stock + Prepaid expenses) 10% Debentures . Investments. Stock.

Company¶s position is sound from point of view of a) Liquidity ratio b) Solvency ratio .

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