A literature review on ratio analysis is a survey of the existing research on the use of financial ratios to evaluate the financial performance and stability of a company. Ratio analysis is a common tool used by investors, analysts, and managers to assess the financial health of a company and make informed decisions about its future prospects.
There are various financial ratios that can be used in ratio analysis, including liquidity ratios, solvency ratios, profitability ratios, and efficiency ratios. Liquidity ratios measure a company's ability to meet its short-term financial obligations, such as the current ratio and the quick ratio. Solvency ratios, on the other hand, measure a company's ability to meet its long-term financial obligations, such as the debt-to-equity ratio and the interest coverage ratio. Profitability ratios measure a company's ability to generate profits, such as the return on assets and the return on equity. Efficiency ratios measure a company's ability to use its resources efficiently, such as the asset turnover ratio and the inventory turnover ratio.
There have been numerous studies on the use of financial ratios in ratio analysis. One study found that liquidity ratios are important indicators of a company's financial health, as they measure a company's ability to pay its short-term debts. Another study found that solvency ratios, such as the debt-to-equity ratio, can be used to assess a company's financial stability and risk of bankruptcy. Profitability ratios, such as the return on assets and the return on equity, have also been shown to be important indicators of a company's financial performance.
However, it is important to note that financial ratios should not be used in isolation, as they may provide conflicting or misleading information. It is recommended to use a combination of financial ratios and other financial analysis techniques, such as trend analysis and common-size financial statements, to get a more comprehensive understanding of a company's financial health.
In conclusion, ratio analysis is a valuable tool for evaluating a company's financial performance and stability. However, it is important to use a variety of financial ratios and consider other financial analysis techniques to get a complete picture of a company's financial health.
Literature review of ratio analysis by Fisher Shawna
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Information derived from financial statements is used to calculate most ratios and make projections. Profitability ratios are a class of measurement employed in assessing the ability of a business organisation to generate earnings relative to its expenses Goel, 2015. Strategic management Ratio Analysis- Literature 4. Whereas net profit means the amount arriving after deducting all the expenses which includes taxes also. . Various financial ratios like gross profit ratio, net profit ratio, operating ratio, dividend payout ratio, turnover ratio etc were used for financial analysis. Results of the study confirmed that through proper working capital management, the company can increase its profitability.
Literature review on ratio analysis by Martin Maggie
The study revealed that liquidity ratios measure by current ratio CR , Liquid ratio LR and Cash Turnover Ratio, CATAR, CLTAR had a diminutive relationship with profitability measured by return on capital employed ROA and ROI. To do so, we create a conceptual framework that maps the influence of regulators, public Financial Performance Review and Objective While ratios are easy to compute, which in part explains their wide appeal, their interpretation is problematic, especially when two or more ratios provide conflicting signals. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. I proudly utilize the privilege to express my hearty thanks to Principal, Dr. It is therefore, not surprising that ratio analysis feature are prominently in the literature on financial management. ORIGINS The primary cause of the evolution of ratio analysis in general was Euclid's rigorous analysis of the properties of ratios in Book V of his Elements in about 300 B. Horrigan T e ~utility of accounting data seems to be assumed axiomatically by most accountants, but it is interest- ing to trace how accounting data have actually been used.
Ratio Analysis
A Training of the Register No: 098001123108 for Summer Internship Fourth Trimester of MASTER OF BUSINESS ADMINISTRATION during August - 2010. Ratio analysis is used to compare certain data within the financial statements to assess liquidity, solvency, profitability. What the ratio does is that they reveal the relationship in a more meaningful way so as to enable equity investors; management and lenders make better investment and credit decisions. The study covered a period of fourteen years from 1998- 99 to 2011-12. The data was analyzed with the help regression analysis to find out the impact of liquidity on profitability, Correlation analysis was used to find out the relationship between liquidity with profitability. Ratio comparisons can be used to compare the financial performance of time periods within the same organization or to compare the performance of different organizations. The results of all financial ratios, together with the prevailing situation of over competition, inelasticity of construction costs and reduced aggregate demand in Malaysia, revealed the extreme difficulty of reversing the financial performance in the coming years.
