Module 10

RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial

(RGYTP) Managers
Presenter: Osama Babiker

Corporate Financial Ratios

Profitability Ratios
Ratio Ratio Indications Ratio Formula
Calculates the percentage of revenues that  (Revenue ‐ COGS) / 
Gross Margin Ratio
are left over after COGS Revenue
Calculates the percentage of revenues that 
Net Profit Margin Net Profit / Revenue
are left over after all expenses and taxes
Calculates the percentage of revenues that  Operating Income / 
Operating Margin
are left over after all expenses Revenue
Displays Earnings Before Taxes (EBT) relative 
Pretax Margin Ratio EBT / Revenue
to revenues
Return on Assets  Quantifies how much profit the business has  Net Income / Average 
(ROA) generated given its available assets Assets
Return on Equity  Quantifies how much profit the business has  Net Income / 
(ROE) generated given its available equity financing Shareholder's Equity
Represents a general return figure that  Change in Value of 
Return on Investment 
investors can utilize to quantify investment  Investment / 
(ROI)
performance Investment Cost
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker

Corporate Financial Ratios

Liquidity Ratios
Ratio Ratio Indications Ratio Formula
CAPEX to Operating  Measuring how much of a company’s  Cash Flow from 
Cash Ratio operating cash flow is funneled/passed into  Operations / CAPEX
capital expenditure projects
Cash Ratio A liquidity ratio that measures a company’s  Cash and Cash 
ability to pay off short‐term liabilities with  Equivalents / Current 
highly liquid assets Liabilities
Current Ratio Measures a business' ability to meet its  Current Assets / 
obligations that are due in less than 1 year Current Liabilities
Operating Cash Flow  Evaluates a business' ability to pay off short  Cash Flow from 
Ratio term liabilities using the cash flow from  Operations / Current 
operations Liabilities
Quick Ratio Do the company’s current assets easily cover  (Cash & Equivalents + 
its current liabilities? Marketable Securities 
+ Accounts 
Receivable) / Current 
liabilities
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker

Budgeting
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker

Budgeting
Goals of the Budgeting Process

Goals of the Budgeting Process

Budgeting is a critical process for any business in several ways.

1. Aids in the planning of actual operations (On-progress Check)

Gets managers to consider how conditions may change and what steps
they need to take, and how to address problems when they arise.

2. Coordinates the activities of the organization

Budgeting encourages managers to build relationships with the other
parts of the operation and understand how the various departments
and teams interact with each other and how they all support the overall
organization.

3. Communicating plans to various managers

Ensures that everyone gets a clear understanding of how they support
the organization.
Ensures appropriate individuals are made accountable for
implementing the budget..
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker

Budgeting
Goals of the Budgeting Process

4. Motivates managers to strive to achieve the budget goals

Budgeting gets managers to focus on participation in the budget
process. It provides a challenge or target for individuals and managers
by linking their compensation and performance relative to the budget.

5. Control operations activities

Managers can compare actual spending with the budget to control
financial activities.

6. Framework for measuring performance

Budgeting provides a means of informing managers of how well they
are performing in meeting targets they have set.

7. Efficient allocation of organizational resources,

Promote the efficient allocation of organizational resources,
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker
 Module 10
RIDA GROUP YOUNG TALENT PROGRAM Finance for Non Financial
(RGYTP) Managers
Presenter: Osama Babiker

The Difference Between Costs and

Expenses
Costs and expenses are two different things.

 Costs are resources given up to achieve an objective.

 Expenses are costs that have been charged against

revenue in a specific accounting period.