Analisis of Financial Statement

Definition

Ratio is the number to be compared with other numbers in a relationship. From this understanding, the
notion of financial ratios is an index that connects two accounting numbers that will be obtained by
dividing a number by another number. Financial ratio analysis is an analytical method used to be an
indicator of the company's growth based on looking at the financial statements for a certain period. By
using this method, it can be seen whether the company's performance has been maximized or not. Based
on this analysis, later all kinds of policies and decisions can be taken.

Purpose

• Materials for Analysis for Potential Investors

• Reference for Giving Credit to Companies
• Determining the Health Level of a Company
• Profit Rate Comparison
• Evaluation Material
• Determining Future Strategy

Type of financial ratio

1. Likuidity Ratio

Liquidity ratio or liquidity ratio is a way to measure the liquidity ability of a company. The way to get
this ratio is to look at the company's current assets relative to its current liabilities. To see this liquidity
ratio analysis, there are several ratios that can be used, such as:

• Current Ratio
The current ratio is a way to measure the company's ability to pay short-term obligations or
debts that will soon mature using available current assets. This means that this ratio will
compare current assets with maturing debt. In this case, the company is said to be healthy
when the ratio between current assets and current liabilities is getting bigger. Therefore, the
higher the company's ability to cover its short-term debt.
• Quick Ratio
The quick ratio or also known as the quick ratio is a way to show the company's ability to pay
current debt with current assets without taking into account the value of inventory. This value
will show how much the ability of the most liquid current assets to cover debt.
• Cash Ratio
This ratio will measure between cash and current assets that can be converted into cash
immediately compared to current liabilities. In this case, cash is the company's money in the
office or in the bank in the form of an account. While cash equivalent assets include current
assets that can be easily and quickly cashed out.
2. Activity Ratio
The next type of financial ratio is the activity ratio. The purpose of this financial ratio analysis is to
determine how many assets the activity level of these assets. With this financial ratio analysis, the
company can see which assets are productive and which are not. In addition, the company can
also allocate excess funds to more productive assets. Ratio analysis can be obtained in the
following ways:
• Accounts Receivable Turnover
Calculating accounts receivable turnover is a way to measure how many times the
average receivables are in a year. This ratio will measure the quality of receivables,
including the company's efficiency in collecting and using them.
• Inventory Turnover
The activity ratio will show the company's ability to manage the inventory they have. The
higher the turnover rate, the more effective the management.
• Fixed Asset Turnover
The activity ratio will also show the company's ability to generate sales based on the fixed
assets they have. The higher the value of this ratio, the more effective the proportion of
fixed assets.
• Total Asset Turnover
The activity ratio is a way to measure the effectiveness of the use of total assets. The
higher the value of this ratio, the better the management is doing its job.
3. Solvability Ratio
Another type of financial ratio is the solvency ratio. This type is a way to measure how effective
the level of use of company assets or assets is. In its use, the financial ratios to be used include:
• Debt to Assets Ratio
This ratio will show how much the company's assets are financed by debt. In another
context, this ratio will measure the extent to which debt can be covered by assets. The
smaller the value ratio, the better.
• Debt to Equity Ratio
This ratio will show how long-term debt is compared to the amount of own capital. In this
case, ideally the amount of debt should not exceed the amount of capital. The smaller the
debt portion, the better.
4. Profitability Rasio
This type of ratio is an analysis of financial ratios that will show the level of return or profit
compared to sales or assets. This analysis is performed using the following ratios:
• Gross Profit Margin: is a measure of the profit from each sale after the company pays the
cost of goods sold
• Operating Profit Margin: a measure of the profit from each remaining sales result after
deducting all other costs and expenses.
• Net Profit Margin: a calculation to see the profit the company gets after deducting all
costs.
• Return On Investment: the company's calculation to generate profits that can be used to
cover the investment issued. The calculation uses net income.
• Economic Profitability: a way to measure a company's ability to generate profit from all
the assets they own.