Advantages of financial analysis or financial ratios
Learn about the advantages of financial analysis or financial ratios and their importance for the management of companies, factories and institutions. In this article, we will learn about the advantages of financial analysis and the disadvantages of financial analysis at length, so it is necessary to use an integrated ERP system to organize the financial accounts of the company, factory or institution.
- Ease of calculation
- It can occur regardless of the scale and nature of the activity
- Assist in cross-company sales and choose the best
Download the free trial version of the IES ERP system for financial accounts
Disadvantages of financial analysis or financial ratios
- Calculations are limited to public information only
- The nickname is not included in the accounts
- Compare finances over a long period of time
First: Liquidity Ratios:
It is a long term sale business relationship
1- Trading ratio: current assets / short-term liabilities
2- Liquidity ratio: current assets / short-term liabilities
3- Monetary Ratio: Cash + Banking / Current Liabilities
Second: Activity Ratios:
Management effectiveness in creating or selling assets becomes present. (i.e. you measure more experience with this type of asset) Asset Management and Shareholders.
These ratios are an indication of whether an investment is an asset return for one or more funds. Investing in inventory implies the need for financial resources for the dysfunctional facility.
1- Inventory turnover ratio = cost of goods sold / average inventory.
2- Average Collection Period = Accounts Receivable + Notes Receivable / Average Daily Sales of Futures Contracts
And the daily average of future sales can be calculated = future sales (assuming all sales) / number of days in the year (360)
3- Fixed assets ratio = Fixed assets = 2.5 times
The acquisition of open spaces in the field of research. All assets and fixed assets contribute to achieving sales of 2.5 riyals.
4 – Total assets ratio = Total assets.
Download the free trial version of the IES ERP system for financial accounts
Third: Coverage Ratios:
This age group price. Refunds, credits and refunds
1- Interest coverage ratio = profit before interest taxes / total interest.
2- The percentage of coverage of cases that are limited to their savings.
Ratio = profit before tax + rent/interest + rent + reserve rate
This means that if the company needs 1,000 riyals in reserve and the tax rate is 50%, it needs 2,000 cash flow to be able to save 1,000 riyals.
3- Cash Coverage Ratio:
= net tax = net tax before tax + rent/interest
Fourth: profitability indicators:
Canned foods show that the prevalence rates of these canned foods are high
A- Sales profit figures.
1- Sales profit margin = profit / sales.
2 – Business profit margin, which is considered more complete than its predecessor, which was able to deal with all design elements.
= net operating profit (i.e. before interest) / sales.
3- Net Profit = Net Profit / Sales.
B- Indicators of profitability of invested capital.
1- The rate of return on money.
2- The ratio of net profit to total assets = net profit / total assets.
3- Revenue power = operating profit (before interest) / operating tangible fixed assets Other assets that do not serve essential functions should be excluded as in other companies. So is the right to capital gains or other exclusions or exceptions to earnings.
Download the free trial version of the IES ERP system for financial accounts
Fifth: Growth rates:
It can be measured in sales (sales in the current year – sales in the previous year) / sales in the previous year) * 100.
Sixth: share percentages:
It measures the level of earnings per share.
1- Earnings per share:
Net – Dividend on Preferred Stock / Number of Common Shares Issued.
2- Dividend Coverage Ratio:
Accessibility measures dividend continuity…
3- The ratio of profit to the value of the share:
Earnings per share/purchase price per share.
4- The market value per share ratio (recurring):
Market value per share Earnings / per share.
5- Dividends per share:
Dividends to be distributed / Number of ordinary shares.
6- The ratio of dividends to share value:
Distributor per share/share market value.
7- The ratio of distributed profits to the capital:
Dividend / share capital.
Download the free trial version of the IES ERP system for financial accounts
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