INTRODUCTION TO FINANCIAL RATIOS (Contd ...)
This section talks about Activity & Valuation ratios and their business interpretation in detail. We will be using following income statement & balance sheet for our analysis on financial ratios and will assume a tax rate of 30% wherever applicable –
4. ACTIVITY RATIOS
“Activity ratios” measures the operational efficiency of the company. These ratios are useful for managers in managing and improving day to day operations of the company. Popular activity ratios used by analysts are described below –
5. VALUATION RATIOS
“Valuation ratios” are often used by small & medium investors for determining overall financial health of the company. The ratios are also used for comparing two or more companies within the same industry before making an investment decision. Popular valuation ratios are described below –
