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    Financial Ratios

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    hamza.hesham.owais.1056

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    Financial Ratios

    Uploaded by

    hamza.hesham.owais.1056
    4 views7 pages

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    Financial+Ratios

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    4 views7 pages

    Financial Ratios

    Uploaded by

    hamza.hesham.owais.1056

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7

    RATIO ANALYSIS

    WHAT IS EXPECTED FROM YOU?


    1. Understand the different types of ratios and their interpretations
    2. Choose 2 companies to start your project
    3. Apply the ratios learnt in tutorial on your project company
    4. Follow up ongoingly
    5. Ask questions about your project and ratios used
    6. Submit a PPT on CANVAS
    7. Present your work through a printed poster
    RATIO COMPARISON TYPES

    1. Trend or time-
    series analysis: to evaluate company’s
    performance over time
    2. Cross-
    sectional analysis: used to compare co
    mpany’s performance to other firms in the
    same sector at the same period
    industry comparative analysis

    1. Combined analysis: a combination of bo


    th time series and cross-sectional
    Profitability Ratio

    1. Profit margin 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒


    Measures the percentage of each sales dollar remaining after 𝑆𝑎𝑙𝑒𝑠
    cost and expenses

    2. Return on assets
    𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
    Measures the overall effectiveness of management in generatin
    g profits with its available assets, also called the return on
    investment 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

    3. Return on equity
    𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
    Measures the return earned on the common stockholders’ inves
    tment in the firm 𝐸𝑞𝑢𝑖𝑡𝑦
    HOW/ FROM WHERE DO WE CAL
    CULATE THE RATIOS?
    Sources
    1. https://www.investing.com
    /
    2. https://www.egx.com.eg/e
    n/homepage.aspx
    3. https://www.nasdaq.com/
    4. https://english.mubasher.inf
    o/countries/eg
    Short Term Liquidity

    1. Current ratio
    𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
    Measures the firm’s ability to cover its short-term obligations 𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
    2. Quick ratio
    𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
    A better measure of liquidity using easily converted assets into cash
    𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

    3. Working Capital Ratio: Current Assets – Current Liabilities


    Working Capital = Current Assets – Current Liabilities 𝑇𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
    Solvency Ratio

    1. Debt to total assets 𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠


    𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

    𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
    2. Debt to Equity
    𝑇𝑜𝑡𝑎𝑙 Equity

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