Ratio:

Is the mathematical relationship between two quantities in the form

of a fraction or percentage

Ratio Analysis?
Ratio analyses are the most popular form of analyses all over the
world and the trusted one also. In ratio analyses as the name suggests
ratios are used in analyzing the financial standings of the
organization.
There are many ratios that can be calculated from the financial
statements pertaining to a company's performance, activity, financing
and liquidity. Some common ratios include the price-earnings ratio,
debt-equity ratio, earnings per share, asset turnover and working
capital.
Significance of Using Ratios
The significance of a ratio can only truly be appreciated when:
1. It is compared with other ratios in the same set of financial

statements.

2. It is compared with the same ratio in previous financial

statements (trend analysis).

3. It is compared with a standard of performance (industry

average). Such a standard may be either the ratio which
represents the typical performance of the trade or industry, or
 the ratio which represents the target set by management as

desirable for the business.

LIQUITDITY RATIOS

Current Assets
 The Current Ratio expresses the relationship between the firm’s
current assets and its current liabilities.

2004 2005 2006 2007 2008

228189783/266610898 380168286/250989562 443024671/280512083 539329878/323649583 581447382/393532622

=.86 :1 =1.51 :1 =1.58 :1 =1.67 :1 =1.48 :1

Current assets/Current Liabilities

The rule of thumb says that the current ratio should be at least 2
that are the current assets should meet current liabilities at least
twice.
In 2004, the bank only had 86 percents worth of current assets for
every rupees of liabilities. This grew to 151 cents in 2005
indicating increasing trend on liquidity;1n 2006 and 2007 the bank
grew However the company is still unable to support its short-term
debt from its currents assets. But in 2008 bank loses because
investment decreases.

Super Quick Ratios

Measures assets that are quickly converted into cash and they are
compared with current liabilities.
 Cash +marketable securities /Current Liabilities

2004 2005 2006 2007 2008

304092854/266610898 275484914/250989562 282226633/280512083 364956719/323649583 332798887/393532622
=1.14 =1.1 =1.01 =1.13 =.85

This ratio realizes that some of current assets are not easily
convertible to cash .The Super quick ratio examines the ability of the
business to cover its short-term obligations from its “quick” assets
only.
In 2004 Super quick ratios is higher then from other period because
marketable securities are higher.

Net Working Assets

Current assets-Current Liabilities

2004 2005 2006 2007 2008

228189783-266610898 380168286-250989562 443024671-280512083 539329878-323649583 581447382-393532622
= -38421115 =129178724 =162612588 =215680295 =187914760