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Analyse de Ratio

Ratio analysis is a quantitative method used to evaluate a firm's efficiency, liquidity, revenues, and profitability through its financial records. Key ratios include liquidity ratios (current and quick ratios), solvency ratios (total-debt and debt-to-equity ratios), profitability ratios (net profit margin and return on equity), efficiency ratios (inventory turnover and total-assets-turnover), and market prospects ratios (price-earnings and dividend yield). However, financial ratio analysis has limitations as it is quantitative and does not account for qualitative factors such as management quality.

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11 views12 pages

Analyse de Ratio

Ratio analysis is a quantitative method used to evaluate a firm's efficiency, liquidity, revenues, and profitability through its financial records. Key ratios include liquidity ratios (current and quick ratios), solvency ratios (total-debt and debt-to-equity ratios), profitability ratios (net profit margin and return on equity), efficiency ratios (inventory turnover and total-assets-turnover), and market prospects ratios (price-earnings and dividend yield). However, financial ratio analysis has limitations as it is quantitative and does not account for qualitative factors such as management quality.

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thenabicute
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INTRODUCTION

Ratio analysis is a quantitative procedure of obtaining a look into a firm’s functional efficiency,
liquidity, revenues, and profitability by analysing its financial records and statements. Ratio
analysis is a very important factor that will help in doing an analysis of the fundamentals of
equity.

Analysts and investors make use of the methods for ratio analysis to study and evaluate the
fiscal wellbeing of businesses by closely examining the historical performance and monetary
statements.

Comparative data and analysis can give an insight into the performance of the business over a
given period of time by comparing it with the industry standards. At the same time, it also
measures how well a business racks up against other businesses functioning in the same sector.
Liquidity Ratios

These ratios evaluate a business’ efficiency to settle its debts as and when they become due,
with its revenues or assets in the disposal. Liquidity ratios cover quick ratio, current ratio, and
the working capital ratio.

The two key financial ratios used to analyse liquidity are :

• Current ratio = current assets divided by current liabilities


• Quick ratio = (current assets minus inventory) divided by current liabilities

The current ratio is also known as the working capital ratio and the quick ratio is also known as
the acid test ratio.

Solvency Ratio
Solvency ratios are also referred to as the financial leverage ratios. These ratios will compare
an organisation’s level of debt with assets, earnings, and equity in order to determine the
possibility of an organisation to stay in operation over an extended period of time by settling
all its short and long-term debts and by paying coupon/interest regularly. Solvency ratios
include interest coverage ratios, debt-asset ratios, and debt-equity ratios.

The two key financial ratios used to analyse solvency are :

• Total -debt ratio = total liabilities divided by total assets


• Debt-to-equity ratio = total liabilities divided by (total assets minus total liabilities)

Coverage

Coverage analysis is used to analyse a company’s ability to pay interest, fees and charges on its
debts but not the underlying capital obligations.

The two key financial ratios used to analyse solvency are :

• Times-interest-earned ratio = earnings before interest and taxes divided by interest


expense
• Debt-service-coverage ratio = net operating income divided by total debt service
charges
Profitability ratios

Profitability ratios indicate how efficiently a business will be able to generate revenues and
profits through its operations. Profit margins, return on equity, return on assets, gross margin
ratios, and return on capital employed are good examples of profitability ratios.

The four key financial ratios used to analyse profitability are :

• Net profit margin = net income divided by sales


• Return on total assets = net income divided by assets
• Basic earning power = EBIT divided by total assets
• Return on equity = net income divided by common equity
Efficiency ratios

Efficiency ratios are also called as the activity ratios. These ratios determine the efficiency of a
business by using its liabilities and assets to boost sales and optimise profits. Inventory turnover
and turnover ratios are examples of efficiency ratios.

The four key financial ratios used to analyse efficiency are :

• Inventory-turnover ratio = sales divided by inventory


• Days-sales outstanding = accounts receivable divided by average sales per day
• Fixed-assets-turnover ratio = sales divided by net fixed assets
• Total-assets-turnover ratio = sales divided by total assets

Market prospects

Market prospects analysis is generally only undertaken for publicly traded companies. It is
generally used to determine the likely prospects of different investment options.

There are numerous financial ratios used to calculate market prospects. Key ones include :

• Price-earnings ratio = stock price per share divided by earnings per share
• Price-cash-flow ratio = stock price divided by cash flow per share
• Market-book ratio = stock price divided by book value per share
• Dividend yield = dividend divided by share price
• Earnings-per-share = profit divided by number of outstanding shares
• Dividend-payout ratio = dividend per share divided by earnings per share or dividends
divided by net income

LIMITATIONS OF FINANCIAL RATIO ANALYSIS

Financial ratio analysis is quantitative rather than qualitative. It, therefore, does not address
certain factors which can play a huge role in determining a company’s prospects. For example,
it cannot analyse the quality of their management. This means that, although financial ratio
analysis can be hugely useful, it only tells part of the story.

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