Financial Ratios: Amrit Nakarmi Lecture #9 Financial Management Msespm 11 Feb 2020

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Financial Ratios

Amrit Nakarmi
Lecture #9
Financial Management
MSESPM
11 Feb 2020
Financial ratios
Profitability Ratios
Profit margin =Net Income/Revenue
Return on Assets (ROA) =Net
Income/Total Assets
Return on Equity (ROE) = Net
Income/Owners’ equity

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Financial ratios
Activity Ratios
Asset Turnover =Revenue/Total Assets
Days’ Receivables =Accounts
Receivable/Average Days sales
Average days sales = Revenue/365

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Financial ratios
Leverage Ratios
Debt Ratio =Total Liabilities/Total assets
Debt to Equity Ratio (D/E) =Total
Liabilities/Owners’ equity
Times Interest earned = (Income before
taxes+Interest expenses-equity in earnings of
affiliates)/Interest expense
Days payables =Accounts payable/Average operating
expenses
Average operating expenses = Operating
expenses/365
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Financial ratios
Liquidity Ratios
Current Ratio =Current assets/current
liabilities
Quick ratio = (Cash + Accounts receivables)/Current
liabilities

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Financial ratios
Market Ratios
Price/Earnings ratio (P/E) =Year end Market
Price/earnings per share
Dividend Yield =Dividend per share/Year end price per
share

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Course Project 1
Financial Ratio Analysis of Co.
Executive Summary
Introduction
Company Background
Objective
Specific Objectives
Literature review
Methodology
Findings/analysis
Conclusion
Reference
Total pages : 20 -30 pp apart from appendix, reference & executive summary
Report due: 2 weeks from today
Presentation: next day

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