Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Ratios
A great number of ratios might be appropriate for this purpose depending on the specific kind of financial performance which is being compared. Amongst those appropriate for such a purpose are
The ratios selected is able to be justified on the grounds that they measure the key determinants of financial performance namely
(1) The company's profit performance gross as well as net profit margins and the returns it offers its investors (ROE & P/E ratio).
(2) Liquidity which will influence its ability to continue trading: inventory/receivables days and dividend and interest cover.
(3) Capital structure as well as level of business risk financial and operating gearing. A comparison which is to be used to assess the relative performance of a particular company should be based on data from companies in the same sector for the reason that other businesses in other sectors may have different operating technology, production systems and sources of finance.
Consequently the average rates of return the scale of operations and the risks of a business will vary from sector to sector. For example a retail bank may face very high fixed costs as it has a large branch network to support. On the contrary a franchised restaurant chain will have very low fixed costs because fixed assets are owned by the franchisees and not the main company. In such circumstances judgement on the relative levels of operating gearing in the two businesses would be impossible because of the variation in the cost structures. Likewise the risks of operating a shoe factory are fundamentally different from those of a chemical plant and so the financial ratios generated by each operation will differ widely.
At the same time it is valuable to compare ratios with firms of differing sizes in the one sector because market dynamics and profitability may well be linked to the scale of a company's operations. For instance in some product markets larger companies may report higher net profit margins as a result of being able to exploit scale economies in production or distribution or the benefits of vertical integration. With contrast in other markets specialisation and niche marketing may increase margins. Comparing ratios among companies of differing sizes facilitates some analysis of the factors which can add to profit.
Question 1 Swap is an agreement among two or more parties to exchange sets of cash flows over a period in future and What do you understand by swap? Describe its features, kind
Country analysis and political risk Country analysis could use tools for example PEST factors in order to strategically analyse countries. Political risk
How do mergers affect communities? A: While a locally controlled bank is merged into a bank headquartered somewhere else (an out-of-market merger), a few apprehension about the i
We defined the conversion premium as the difference between the market price of the convertible and the conversion value. The conversion premium ratio tells us ab
Q. Traditional Approach of Financial Management? Traditional Approach: - Under this schema the role of financial management was limited to the procurement of funds on suitable
Cash Flow Valuation Technique The aim of this research is to empirically enquire into how to value a company using discounted cash flow valuation technique within its real lif
Image Storage Corporation has 1,000,000 shares outstanding. It wishes to issue 500,000 new shares using a (North American) rights issue. If the current stock price is $50 and the s
Steps involved in the Process of Securitization The following are the major steps involved: The lender (also called the originator) - in th
What are the strategies in managing your finances? How it should be monitor?
What is the primary assumption behind the experience approach to forecasting? The experience act to forecasting is based on the assumption that things will happen a certain way
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd