Name of Ratio Formula Solution
Year 1 Solution
Year 2 2014 2013 % Change /Increase or Decrease
Return on Total Assets Net Capital ÷ Average Total Assets 1200/879 1580/1200 136% 132% Decrease
Return on Equity Net Capital available to Common
Stockholders ÷ Average Common
2345/3400 3320/8500 68%
Age of Receivables Average AR (net) x 365 ÷ Net Credit
Sales 124*365/310 124*365/310 23 45 Increase
Inventory Turnover Cost of Sales ÷ Average Inventory
1890/320 1430/450 6.2 5.5 Decrease
Current Year Net Sales – Prior Year Net Sales/Prior Year Net Sales 1050/450 1570/600 23% 28% Increase
Percentage Net Sales – Cost of Sales ÷ Net Sales 910/6519 975/9033 13.5% 10% Decrease
Operating Expenses as a Percentage of
Sales Operating Expenses ÷ Net Sales 1976/5600 2300/9030 33% 21% Decrease
Bad Debt as a Percentage of Sales Bad Debt Expense ÷ Net Credit
180/710 250/980 31% 24.4% Decrease
Maintenance as a Percentage of Net Fixed Assets Repairs and Maintenance Expense ÷
Net Fixed Assets
2000/4500 2700/8000 20.9% 21.5% increase
Current Ratio Current Assets ÷ Current Liabilities 2600/23 3000/29 112% 116% Increase
Quick Ratio Current Assets – Inventory – Prepaid items ÷ Current Liabilities
465/128 700/200 40.5% 39.1% Decrease
Debt Ratio Debt ÷ Total Assets 1380/1000 1270/510 1.3% 3.6% increase
Earned Operating Capital ÷ Annual Interest
Payments 2077/1750 3400/830 21.67% 44.56% increase
Coverage Net Capital + Depreciation ÷ Annual
Principal Payments 170/530 190/400 35.2% 38.7% Increase
The ideas, uses and impediments of financial ratio analysis are clarified further down. A portion of the essential procedures of computing ratio investigation are inspected. The brief history of Ajman Bank open restricted organization and their future goals are encased. Budgetary proclamations are utilized to ascertain and investigated utilizing ratio examinations from financial specialist’s perspective. Finally, confinements of monetary ratio investigations are talked about.
It has been said that we must measure what you hope to oversee and perform. Without estimation, you have no reference to work with and accordingly, you have a tendency to work oblivious. Restricted of securing references and dealing with the money related issues of an association is to utilize ratio. Ratios are basically connections between two monetary equalizations or money related estimations. These connections secure references so organization or a business can see how well monetary execution is. Ratio additionally amplify customary method for measuring money related execution i.e. depending on money related articulations. By applying ratio to an arrangement of monetary explanations, organization or a business can better comprehend budgetary execution.
Liquidity ratios The advantage of breaking down liquidity ratio is assessing the dissolvability, monetary solidness and administration of working capital of the organization or a business. Meaning of liquidity ratios is the extent of aggregate resources that are promptly convertible into money that a clearing bank must keep up with a specific end goal to reimburse stores on interest. As per Anil B.Roy Chowdhury (1978, p.2) ” “Liquidity” implies transformation of advantages into money amid the ordinary course of business and to have a customary continuous stream of money to meet outside current liabilities or current commitments as and when due and payable” Common liquidity ratio are current ratio, quick ratio and working capital ratio. ● Current ratio The current ratios are primarily used to give a thought of the organization’s capacity to pay back its transient liabilities (obligation and payables)with its fleeting resources (money, stock, receivables). The current ratio can give a feeling of the productivity of an organization’s working cycle or its capacity to transform its item into money. Organizations that experience difficulty being paid on their receivables or have long stock turnover can run into liquidity issues because they are not able to allay their commitments.
The quick ratio is a stringent test that demonstrates whether a firm has enough transient advantages for spread its quick liabilities without offering stock. For some organizations stock can’t be changed over into money rapidly. Hence, quick ratio avoids inventories from any measure of liquidity (Chaker & Salih, 2010).
Working capital ratio measures how well current liabilities are secured by the capital produced from an organization’s operations in the short-term. Utilizing capital instead of wage is infrequently a superior sign of liquidity essentially in light of the fact that, as we know, money is the way bills are regularly paid off.
We will investigate effectiveness ratios to assess the overhead structure of organization. Proficiency is additionally a decent measure of productivity. Venture Ratios Investment ratios give profitable data to real or potential shareholders. These ratios are likewise of enthusiasm to administration, since an organization relies on potential financial specialists for further finances for development. Capital every offer Earnings every offer ratio relate the profit produced by the business accessible to shareholders, amid a period to the quantity of shares issued. This ratio is critical to the speculators for two reasons: – It gives the financial specialist some thought of security of future profits. – Investors can check to guarantee that administration are not paying out all capital however are seeking after a judicious arrangement of stopping back some piece of the yearly benefit.
Earnings Ratio Price/capital ratio is determined by a contrasting the business sector cost of a normal offer with the profit every offer. This may be communicated as such a variety of years buy of the benefits. Profit Yield Dividends proclaimed are constantly in light of a rate of the ostensible estimation of issued offer capital
Chaker, M. N., & Salih, A. (2010). The impact of the global economic crisis on the Islamic banks and financial institutions across UAE. Journal for International Business and Entrepreneurship Development, 5(2), 113-125.