ratios example
Post on 09-Jan-2016
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Ratio AnalysisRatio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. After calculating ratios for each year's financial data, the analyst can then examine trends for the company across years. Since ratios adjust for size, using this analytical tool facilitates intercompany as well as intercompany comparisons. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges of the company's operating success for a given period of time. Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. 1: Debt RatioThe proportion of a firm's total assets that are being financed with borrowed funds. The debt ratio is calculated by dividing total long-term and short-term liabilities by total assets.DEBT RATIO = TOTAL LIABILTIES / TOTAL ASSETS 2013 88.2%2014 88.2%
DEBT RATIO
INTERPRETATION Here we can see that there is no change in the debt ratio. When the debt increase so, loan acquire liability decrease.
2: Profitability RatiosThe continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital. Good earning performance enables a bank to fund its operations, remain competitive in the market and increase or decrease in market funds. Profitability ratios relate profit to sales and investments. These ratios indicate the firms overall effectiveness of operations and give us idea how well firm utilized its resources in generating profit and shareholder value. Gross Profit Margin RatioGross profit margin ratio is used to assess the profitability of a Bank's core activities. Gross profit margin indicates the relationship between gross profit and interest earned. A high gross profit margin indicates that a Bank can make a reasonable profit.
Gross profit margin = Gross Profit / Interest earned (Revenue)2013 18.35% 2014 51.23% Analysis The Year 2013 has been an outstanding year with the bank recording the lowest profit in its history i.e. 18.35 %.The National Bank of Pakistans wide range of product offering, large branch network and committed workforce are some of fundamental strengths that enabled NBP to achieve exceptional in a very competitive market. The gross profit is 51.23% in 2014.
Net Profit Margin RatioNet profit margin measures the percentage of revenue remaining after all cost and expenses, including interest and taxes have been deducted. Net profit margin = Net Profit after Taxes / Interest earned
2013 5.49%2014 13.94%
Analysis Net profit margin shows in 2013 i.e.. 5.49%, The net profit margin is on its highest level at the end of 2014 as it indicates a percentage of 13.94%. it show better performance of NBP in 2014 as compare to 2013
3: Assets TurnoverThis ratio is useful to determine the amount of revenue that is generated from each Rupee of assets. The Banks with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Assets turnover = Revenue/ Total Assets2013 0.07 2014 0.07
Interpretation The assets turnover show the same result in both years.
4 : Current RatioA current ratio is a liquidity ratio that measures firm ability to pay its short-term obligations.Current ratio = current liability/ current assets 2013 0.14 2014 0.14
INTERPRETATION Current ratio is a measure of the current adequacy of company's current assets to meet its current obligations. It must be greater than 1. If it is less than 1, liabilities exceed current assets. For every Rs.1 of liabilities, the company has a ratio amount of current assets available. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better.
5 : Return on Assets:The ratio shows the efficiency of organization that how efficiently utilize their assets. This ratio relates profit to assets.Return on assets = Net profit after tax / total assets 2013 0.382014 1.03
6: Cash Ratio This ratio shows that the cash is enough for payment of current liabilities or not. This ratio is obtained by dividing cash by current liabilities. For a bank this is the cash held by the bank as a proportion of deposits in the bank.Cash ratio = Cash / Current Liabilities2013 0.132014 0.07
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