Financial Performance Evaluating Using Ratio Analysis

DATA ANALYSIS AND INTERPRETATION

FINANCIAL PERFORMANCE EVALUATING USING RATIO ANALYSIS

The ratio analysis is one of technique of financial analysis to evaluate the financial condition and performance of business entities .sin simple ratio means the computation of one figure to other relevant figures and measures the relationship between the different variables. A ratio is simple arithmetical expression of the relationship of one number to another .it may be defined as the indicated of two mathematical expression. ratio analysis is technique used to interpretation of financial statements.

Ratio expressed in mathematically known as financial ratio. Ratio helps to summaries large quantities of financial data and to make qualitative about the firms financial performance and the point to note is that a ratio reflecting a quantitative relationship helps to form a qualitative judgment and they are such as nature of financial ratios .

1.Liquidity ratio :

Liquidity ratio measures a company ability to pay of its short term debt. It done by comparing the company liquid assets and its short term liabilities.

Liquidity refers to the ability of a certain to meet the current obligations as and when these become due. ratios are used to measure the short term financial sound of the business.

current ratio :

current ratio is the difference between current assets and current liabilities. current ratio is shoe the ability of company to meet its short term commitment assessed by comparing current assets with current liabilities and working capital excess over the current assets and current liabilities it is also called as working capital ratio.

current assets

Current ratio = current liabilities

INTERPRETATION :

B. Quick ratio :

Quick ratio is also called as acid ratio or liquid ratio .it is also another ratio to test the liability of the concern and is used to known the relationship between the quick assets and current liabilities and main purpose measure the ability of short term pay of its current liabilities.

The acid –test ratio is the ratio between quick assets and current liabilities and is calculated by dividing quick assets divided current liabilities.

Quick assets

Quick ratio = current liabilities

INTERPRETATION :

LEVERAGE RATIO :

Its the ratio provides an insight into financial techniques used by the firms and focus as a consequences and to shoes the long term solvency position and periodic payments during the period of loan and repayment of principal on maturity.

A. Debt equity ratio :

Debt equity ratio is one of the leveraged ratio it is used compare a companies total liabilities to its total shareholder equity and it is the relationship between the long term debts and share holders funds .and its computing ratio is to measure the proposition of debt and equity financing of the firm.

Long term debts

debt equity ratio = share holders funds

INTERPRETATION :

B. Interest coverage ratio :

Interest coverage ratio is also one of the leverage ratio and the interest ratio is used to determine company can pays its interest expenses on outstanding debt and its ratio is calculated earning before interest and taxes(EBIT).this ratio establishes a relationship between net profits before interest and taxes and interest on long term debt.

Earnings before interest and taxes(EBIT)

Interest coverage ratio = debt interest

INTERPRETATION :

3.Profitability ratio :

The primary objectives of a business undertaking is to earn the profits. The many company earns profits to survive and to grow over a long period ,the operating efficiency of the business concern ultimately adjusted by the profits earned by the firm .and the firm uses the profits for the future growth and expansion and diversification of funds.

A. Gross profit ratio :

This ratio is also called as the gross margin .this measures relationship between gross profit and net sales. Gross profit results in the changes in price ,sales and costs. The company cost of sales or cost of goods sold and overheads like labor ,raw materials and manufacturing expenses involved production process and expenses deducted from the sales.

Gross profit *100

Gross profit ratio = Net sales

INTERPRETATION :

B.Net profit Ratio :

Net profit ratio it measures the relationship between net profit and net sales .a high profit margin it ensure the adequate return to the owners and investors to invest in the company.net profit margin used to measures the relationship between the earning before interest and taxes and net sales.

Net profit/earning before interest and taxes *100

Net profit ratio = Net sales

INTERPRETATION:

4.Turnover ratio :

Turnover ratio are the funds invested in various assets in business to make high sales and earn profits. The efficiency of the assets which are managed directly affect the volume of sales turnover ratio is also called as activity ratio because they indicates the speed with its assets are converted into sales.

A. Account receivables :Account receivable ratio is one types of turnover ratio and it is used to measure the how the effectively and efficiency firm or business can receives its account receivable and it shows the relationship between the net sales and account receivables .

Net sales

Account receivable = Receivable

INTERPRETATION:

B. Account payables :

Accounts payables is one of the turnover ratio is used to measure which the firm pays to its creditors and where the firm pays to its creditors it may be for short term and long term payables .

Net sales

Account payables = payables

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NON FINANCIAL PERFORMANCE :

Top management :

Top management is consists of board of directors ,chairman ,vice president, chief executive officer and general managers and they are the organization and hoe forms the goal ,objectives and strategic plans and vision of the bank .in the SUCO bank has board of directors and chairman and CEO .

Product range :

The product range is set of variation on a specific product made to appeal to different market segments and the business or firm offers the wide range of product to the investor and attracts its investor to invest. The SUCO bank invest fund in various alternatives like

Bonds

Insurance

General and health insurance

Funds for self help groups

Diversification :

diversification is the process of allocation of funds or capital to earn the profits and investment the other business that can reduces the particular risk of the business and in common the diversification means the allocating investment and reducing the risk .

In SUCO the diversifies his funds to the inform of

credit creation through the secondary deposits

provide more loans and advances

makes in investment in safe instruments

Availability of cost of inputs :

In SUCO bank cost of inputs means the required input for running the day to day activates of bank like employees salaries , maintains of systems and bank accounting transactions ,and managing the other expenses and to run a banking activates, the major inputs are employees, finance, and other cost inputs .

Pattern of shareholding :

In the SUCO bank the shareholding pattern is more of share are issued to the general public and the ownership pattern is represent the growth in the banking institution and maintaining and create the interest of all the share holders and general public to invest in banks.