Академический Документы
Профессиональный Документы
Культура Документы
ASSIGNMENT ON
UNIVERSITY OF KARACHI
2) Ratios Analysis:
The ratio analysis is the most important tool of financial statement analysis. Ratios simply means one number expressed in term of another. A ratio is statistical yardstick by means of which relationships between two or various figures can be compared or measured. Ratios show how one number is related to another. Advantages of Ratios Analysis: 1) Simplifies financial statements. 2) Facilitates inter- firm comparison. 3) Helps in planning. 4) Makes inter- firm comparison possible. 5) Help in investment decisions. There are various ratios which can analyze any particular financial statement of any firm, some important ratios are given below. CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity a nd is most widely used to make the analysis for short term financial position or liquidity of a firm.It is calculated by dividing the total of the current assets by total of the current liabilities. Curre nt Assets Curre nt Liabilites QUICK RATIO:
Liquid ratio is also termed as "Liquidity Ratio", "Acid Test Ratio" or "Quick Ratio".It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. Curre nt Assets-Inventories Curre nt Liabilities FIXED ASSET TURNOVER RATIO:
This ratio measures the efficiency and profit earning capacity of the concern.Higher the ratio, greater is the intensive utilization of fixed assets.Lower ratio means under- utilization of fixed assets. The ratio is calculated by using following formula: Net Income/ Profit after tax Net Fixed Asset TOTAL ASSET TURNOVER RATIO:
The final asset management ratio, the total assets turnover ratio, measures the turnover of all the firms assets. It measures the ability of a company to use its assets efficiently.This ratio considers all assets, current and fixed.
A ratio that indicates what proportion of debt a company has has relative to assets. The measures gives an idea to the leverage of the company along with the potential risk the company faces in terms of its debt load.A debt ratio of greater than 1 indicates that a company has more debt than assets, meanwhile, a debt ratio of less than 1 indicates that a company has more assets than debt. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's level of risk. Debt Ratio = Total Liabilities x 100 Total Assets TIMES INTEREST EARNED RATIO:
Times interest earned (also called interest coverage ratio) is the ratio of earnings before interest and tax (EBIT) of a business to its interest expense during a given period. It is a solvency ratio measuring the ability of a business to pay off its debts. EBIT* Inte rest charges *EBIT= Earning before interest and tax BASIC EARNING POWER (BEP) :
This ratio shows the raw earning power of the firms assets before the influence of tax and debts, and it is useful when comparing firms with different debts and tax situation. The higher the BEP ratio, the more effective a company is at generating income from its assets.Using EBIT instead of operating income means that the ratio considers all income earned by the company, not just income from operating activity. This gives a more complete picture of how the company makes money.BEP is useful for comparing firms with different tax situations and different degrees of financial leverage. EBIT x 100 Total Asset RETURN ON COMMON EQUITY :
It is the ratio of net profit to share holder's investment. It is the relationship between net profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes the profitability from the share holders' point of view. The ratio is generally calculated in percentage. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Net income/Profit after tax x 100 Common equity
Earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. Net Income/Profit Afte r Tax No. Of shares PRICE/EARNING RATIO:
Price earnings ratio (P/E ratio) is the ratio between market price per equity share and earning per share. The ratio is calculated to make an estimate of appreciation in the va lue of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. Market Price per share Earning per share BOOK VALUE PER SHARE:
A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.Should the company decide to dissolve, the book value per common indicates the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid. In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate. Book Value per share = common equity Shares outstanding
The ratio of a stocks market price to its book value gives another indication of how investors regard the company. Companies that are well regarded by investors which means low risk and high growth have high M/B ratios.A ratio used to find the value of a company by comparing the book value of a firm to its market value.Book value is calculated by looking at the firm's historical cost, or accounting value.Market value is determined in the stock market through its market capitalization. Market value per share Book value per share
1.10
1.09
1.09
1.09
1.09 1.08 1.08
1.11 1.10
1.10
1.10 1.09 1.09 1.09 1.08 1.08 1.09 1.09
1.08
1.07 2011 2010 2009 2008 2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
0.8 0.6
0.4 0.2 0 2011 2010
0.73
0.73
2009
2008
2007
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.012 0.01
0.01 0.008 0.006 0.004
0.01
0.01
0.01
0.01
0.002
0
2011
2010
2009
2008
2007
91.50%
91.05%
91.00%
90.86%
90.38% 90.23% 89.59%
90.50% 90.00%
89.50% 89.00%
88.50%
2011 2010 2009 2008 2007
1.2
1 0.8 0.6 0.4
1.14
1.07
1 0.91 0.83
0.2
0
2011
2010
2009
2008
2007
3.50%
3.01%
3.00% 2.50% 2.00%
2.92% 2.47%
2.93%
2.18%
1.50%
1.00%
0.50%
0.00% 2011 2010 2009 2008 2007
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
22.30% 19.61%
17.83%
17.19%
18.31%
2011
2010
2009
2008
2007
25
20.26 20 15
10 5 17
14.71
14.31
14.61
18 16
14 12 10 8.39
16.29
8 6
4 2 0 2011 5.28
7.02
5.03
2010
2009
2008
2007
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
9.2
9
9.08
8.8
8.6 8.4 8.2 8
8.66
8.32 7.98
8.24
7.8
7.6
MARKET BOOK RATIO: Market value per share Book value per share
35 30 25 29.82
20
15 11.8 13.8 14.98
10
5
8.67
0
2011 2010 2009 2008 2007
1.11
1.11
1.11
1.11
1.1
QUICK RATIO:
1.112
1.11
1.11
1.11
1.11
1.11
1.108
1.106
1.104 1.102 1.1
1.1
1.098 1.096 1.094 2011 2010 2009 2008 2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
1.2
1.02 1
0.8 0.6 0.4 0.2
0.88
0.81
0.86
0.89
0
2011 2010 2009 2008 2007
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2011 2010 2009 2008 2007
86.06%
2007
3.5 3 2.5 2
1.5
1 0.5
5.60%
5.46%
5.40%
5.20% 5.00% 4.93%
4.82%
4.62% 4.55%
4.80%
4.60% 4.40%
4.20%
4.00%
2011
2010
2009
2008
2007
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
30.00%
25.00% 20.00%
24.61%
24.39%
25.37%
15.00%
10.00% 5.00%
0.00%
2011 2010 2009 2008 2007
27 26.17 26
25 24 23 22 23.22 24.47
22.2
22.42
18
16
15.32
14
12 10
10.3
9.8
8
6 4 2 0
5.8
5.16
2011
2010
2009
2008
2007
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
10
9 8 7
9.44
6
5 4
3
2 1 0 2011 2010 2009 2008 2007
MARKET BOOK RATIO: Market value per share Book value per share
60 50
53.11
40
30 20 14.26 25.11
27.36
16.64
10
0 2011 2010 2009 2008 2007
1.065 1.06 1.055 1.05 1.045 1.04 1.035 1.03 1.025 1.02 1.015
1.06
1.06
1.06
1.04 1.03
2011
2010
2009
2008
2007
1.065 1.06 1.055 1.05 1.045 1.04 1.035 1.03 1.025 1.02 1.015
1.06
1.06
1.06
1.04
1.03
2011
2010
2009
2008
2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
0.6
0.5 0.4 0.3 0.2
0.56
0.57 0.53
0.54
0.36
0.1
0 2011 2010 2009 2008 2007
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.012 0.01
0.01 0.008
0.01
0.01
0.01
0.01
0.006
0.004 0.002
94.50%
94.00% 93.50% 93.00% 92.50% 92.00% 92.84% 93.93% 93.78%
92.00%
91.50% 91.00% 90.50% 90.00%
91.60%
2011
2010
2009
2008
2007
1.07
1.04
1.08
0.92
0.68
0.4
0.2 0
2011
2010
2009
2008
2007
2.74%
2.52%
1.86%
2.50%
2.00% 1.62%
1.50%
1.00%
0.50%
0.00% 2011 2010 2009 2008 2007
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
30.00%
25.00% 20.00%
26.95%
26.39%
27.54%
22.15% 19.73%
15.00%
10.00% 5.00%
0.00%
2011 2010 2009 2008 2007
14
12 10 8 6 4 2 0 7.57 11.79 10.52 10.02
6.33
2011
2010
2009
2008
2007
18
16
16.91
14
12 10 8 6 4.55 6.44 5.91
4.74
4
2
0
2011 2010 2009 2008 2007
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
5
4.5 4 4.37
3.98
3.64
3.5
3 2.5
3.21
3.42
2
1.5 1
0.5
0
2011
2010
2009
2008
2007
MARKET BOOK RATIO: Market value per share Book value per share
40 35
30 25 20 15 10 5
37.43
17.04 12.27
16.26
9.35
1.105 1.1 1.095 1.09 1.085 1.08 1.075 1.07 1.065 1.06 1.055
1.07
1.07
2011
2010
2009
2008
2007
1.105 1.1 1.095 1.09 1.085 1.08 1.075 1.07 1.065 1.06 1.055
1.1
1.09 1.09
1.07
1.07
2011
2010
2009
2008
2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
0.6
0.5
0.57
0.45 0.4 0.48 0.42
0.4
0.3
0.2
0.1
0
2011 2010 2009 2008 2007
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.012
0.01
0.01 0.008
0.01
0.01
0.01
0.01
0.006
0.004 0.002 0
2011
2010
2009
2008
2007
92.04%
91.23%
91.00%
90.50% 90.00% 89.50% 89.36%
89.67%
89.49%
89.00%
88.50% 88.00% 2011 2010 2009 2008 2007
0.82
0.81 0.79
0.81 0.8
0.8
0.78 0.76 0.74
0.74
0.72
0.7
2011 2010 2009 2008 2007
3.00% 2.95% 2.90% 2.85% 2.80% 2.75% 2.70% 2.65% 2.60% 2.55% 2.50%
2.73% 2.65%
2011
2010
2009
2008
2007
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
30.00%
25.00%
20.00% 15.00% 19.23%
23.98%
17.92%
16.67%
16.30%
10.00%
5.00% 0.00% 2011 2010 2009 2008 2007
14 12 10
11.98 9
11.41 8.53
8.35
8 6 4 2 0
2011 2010 2009 2008 2007
25
20.85
20 15 10 5 0 2011 2010 2009 2008 2007 4.47
7.3
6.92 4.2
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
7
6 5 4
6.23 5.4
5.23
4.66 4.76
3
2 1
0
2011 2010 2009 2008 2007
MARKET BOOK RATIO: Market value per share Book value per share
60 50 50
40
30
20
10 0 2011 2010 2009 2008 2007 8.59 12.17 11.28
7.5
7)
1 0.95
0.95
0.91
0.9 0.85 0.8
0.75
2011 2010 2009 2008 2007
10 9 8 7 6 5 4 3 2 1 0
4.16
4.78
2011
2010
2009
2008
2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2011 2010 2009 2008
0.07
2007
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2011 2010 2009 2008 0.005 0.003
0.014
0.008
0.007
2007
92.50%
92.00%
92.18% 91.51%
91.50% 91.00%
1.50%
1.00% 0.50%
0.00%
2011 2010 2009 2008 2007
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
30.00%
27.13%
25.00%
20.00% 15.00% 10.00% 5.00%
0.00%
2011 2010 2009 2008 2007
2.55
2.5
2
1.5 1 1.34 0.78 1.54 1.26
0.5
0
2011
2010
2009
2008
2007
25
21.67
20
15 10 5 0 2011 2010 2009
17.05
15.12 12.97
10.22
2008
2007
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
1.68
1.51 1.37 1.29
1.2
1 0.8
0.6
0.4 0.2 0
0.49
2011
2010
2009
2008
2007
MARKET BOOK RATIO: Market value per share Book value per share
40
35.47
35
30 25.23 16.65 10.06 11.49
25
20 15 10 5 0 2011 2010 2009 2008 2007
0.98 0.97
0.96 0.95
0.97
0.96
0.94
0.93 0.92 0.91
0.93
0.93
0.92
0.9
0.89
2011
2010
2009
2008
2007
0.98
0.97 0.96 0.95
0.97
0.96
0.94
0.93 0.92 0.91
0.93
0.93
0.92
0.9
0.89
2011
2010
2009
2008
2007
FIXED ASSET TURNOVER RATIO: Net Income/ Profit after tax Net Fixed Asset
0.06
0.044
0.04 0.02 0 2011 -0.02 2010 2009 2008 -0.009 2007 -0.009
0.006
TOTAL ASSET TURNOVER RATIO: Net Income/ Profit Afte r Tax Total Assets
0.01 0.005
0.007
0.001 0
2011 2010 2009 2008 -0.003 2007 -0.003
-0.005 -0.01
-0.015 -0.02
-0.014
100.00%
90.97%
90.00%
80.00% 70.00% 60.00%
89.42%
86.17%
72.80% 73.39%
50.00% 40.00%
30.00% 20.00% 10.00%
0.00%
2011 2010 2009 2008 2007
1.50%
1.03% 1.00%
0.50% 0.10%
0.00% 2011 2010 2009 2008 2007 -0.70% -1.20%
-0.50%
-1.00%
-1.50%
-2.00%
-1.64%
RETURN ON COMMON EQUITY : Net income/Profit after tax x 100 Common equity
7.96%
-10.18%
1
0.8 0.6 0.4 0.2 0
0.78
-0.2 -0.4
-0.6 -0.8 -1
-0.9
40.33
3.97 2011 2010 2009 -8.05 2008 2007
-72.5
-135
BOOK VALUE PER SHARE: Book Value per share = common equity Shares outstanding
1
0.98 0.96 0.94 0.92 0.9 0.9 0.97
0.99 0.98
0.9 0.88
0.86 0.84 2011 2010 2009 2008 2007
MARKET BOOK RATIO: Market value per share Book value per share
18 16 14 12
16.36
10 8 6 4
2 0 2011 2010 3.2 4.03
8.06
7.4
2009
2008
2007