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Management Accounting                                                 Pooja, Lovely Professional University




                    Notes                                  Unit 4: Ratio Analysis


                                     CONTENTS

                                     Objectives
                                     Introduction
                                     4.1  Defi nition
                                     4.2  Classification of Ratios

                                          4.2.1  On the basis of Financial Statements

                                          4.2.2  On the basis of Functions
                                     4.3  Liquidity Ratios
                                          4.3.1  Current Assets Ratio
                                          4.3.2  Acid Test Ratio

                                          4.3.3  Super Quick Assets Ratio
                                     4.4  Solvency Ratios
                                          4.4.1  Debt-equity Ratio
                                          4.4.2  Proprietary Ratio
                                          4.4.3  Fixed Assets Ratio

                                          4.4.4  Coverage Ratios
                                     4.5  Profi tability Ratios
                                          4.5.1  Gross Profi t Ratio
                                          4.5.2  Net Profi t Ratio

                                          4.5.3  Operating Profi t Ratio
                                          4.5.4  Return on Assets Ratio
                                          4.5.5  Return on Capital Employed
                                     4.6  Turnover Ratios
                                          4.6.1  Stock Turnover Ratio
                                          4.6.2  Debtors Turnover Ratio

                                          4.6.3  Creditors Turnover Ratio
                                     4.7  DUPONT Analysis
                                     4.8   Relevance of Ratio Analysis
                                     4.9  Summary

                                     4.10 Keywords
                                     4.11 Review Questions
                                     4.12 Further Readings








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