CH-5 Accounting Ratios

CLASS XII UNIT

CLASS XII UNIT

________- 4 ANALYSIS OF FINANCIAL STATEMENTS CHAPTER- FINANCIAL STATEMENT ANALYSIS & CHAPTER- RATIO ANALYSIS Meaning of Financial Analysis "Financial statement analysis is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements and a study of the trends of these factors as shown in a series of statements ..

Inventory

________ is not included in liquid assets as it may take a lot of time before it is converted into cash.

Objective

________ and Significance: Operating Ratio is a measurement of the efficiency and profitability of the business enterprise.

total of shareholders

As defined earlier long- term funds are also known as capital employed which means ________ funds and long- term loans.

Prepaid expenses

________ too are excluded from the list of liquid assets because they are not expected to be converted into cash.

Government

________ can increase the GST or can enforce the price regulations.

long term lender

A(n) ________ is interested in finding out whether the business will earn sufficient profits to pay the interest charges regularly.

Ii

(________) Total assets to Debt Ratio: This ratio is a variation of the debt- equity ratio and gives the same indication as the debt- equity ratio.

Financial statements

(6) Difficulty in Forecasting: ________ are a record of past events and historical facts.

financial difficulties

It is an indicator of the shortage of working capital and may put the concern in ________.

Loose Tools

Items excluded from Current Assets: (i) ________, Stores and Spares (ii) Provision for Doubtful Debts Current Liabilities: Current liabilities are the liabilities payable within 12 months from the date of Balance Sheet or within the period of Operating Cycle.

Turnover

________ indicates the speed or number of times the capital employed has been rotated in the process of doing business.

Analysis of financial statements

(6) Significance for Employees: ________ helps the employees in determining the profitability of the business enterprise.

Horizontal presentation

________ emphasises the fact that statement for a series of periods are far more significant than those for a single period and that the accounts for one period are but an instalment of what is essentially a continuous history.

Objective

________ and Significance: An ideal quick ratio is said to be 1: 1.

Inventory

________ is excluded from liquid assets because it has to be sold before it can be converted into cash.

financial statements

(2) Vertical Analysis: jn such type of analysis, ________ for a single year or on a particular date are reviewed and analysed with the help of proper devices like ratios.

Analysis of financial statements

________ also helps the trade unions in negotiating wages agreements.

Objective

________ and Significance: This ratio indicates the speed with which the amount is being paid to trade payables.

Objective

________ and Significance: This ratio indicates the speed with which the amount is collected from trade receivables.

Objective

________ and Significance: This ratio indicates how many times the interest charges are covered by the profits available to pay interest charges.

Objective

________ and Significance: Operating Ratio is a measurement of the efficiency and profitability of the business enterprise.