The Company Balance Sheet – Layout, Preparation, Analysis or Interpretation
The Company Balance Sheet is very much different from that of a Sole proprietor especially the liability side.
The presentation of this format will give a clearer picture.
Balance Sheet
Interpretation of Financial Statements
Ratio Analysis
Ratios are tools used by individuals to conduct a quantitative analysis of information in a company’s financial statements. Ratios are calculated from current year numbers and are then compared with that of the previous years’, other companies, the industry or even the economy to judge the performance of the company. Ratio analysis is predominantly used by proponents of fundamental analysis.
Uses of Ratio:
- Ratios are used in preparing industrial averages
- It helps in comparison of business performance
- It can be used to analyze and interpret financial data.
Classification of Ratio:
Ratios are generally classified into four, these are:
- Profitability ratios
- Utilization of assets ratio
- Financial ratios
- Investment ratios
Profitability Ratios
This is a ratio that is used to measure the profit earned by a business over a period of time in relationship to the capital to achieve that level of profit.
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