Professional Documents
Culture Documents
ANALYZE
COMPARE
DIG DEEP
Learning Objectives
Liquidity Ratio
Solvency Ratio
Activity Ratio
Profitability Ratio
Shareholder’s Ratio
Liquidity Ratio
1. Current Ratio : It is the relationship between the current assets and
current liabilities of a concern.
Ideal Ratio = 2
NWCR = Sales/NWC
Ideal Ratio = 1
Normally it is less than 1.
(contd.)
3. Debt-Equity Ratio: .
This ratio measures
the proportion of
long term debt to
equity.
DER=Long Term
Debt/Equity
Activity Ratios
Fruhan Model
• ROE=Net Profit x Capital Intensity x Financial
Leverage
Model is consistent with wealth maximization
Considers financial decision along with operating
decision
Considers the Liabilities along with the Return on
Assets
??? Any
Questions??