The document discusses various methods for analyzing financial statements, including ratio analysis. It provides examples of calculating key ratios to measure a company's liquidity, profitability, and activity, such as current ratio, acid-test ratio, rate of return on sales, return on assets, inventory turnover, and accounts receivable turnover. The document aims to demonstrate how these ratios can be used to evaluate a company's financial performance and health.
20. SALES
Income Statement
LESS COGS
GROSS PROFIT
LESS OPERATING EXPENSES
GROSS OPERATING PROFIT OR EBIDTA
LESS DDA OR NON OPERATING EXPENSES
EBIT OR EARNING BEFORE INTEREST AND TAXES
LESS INTEREST ON DEB. OR BANK LOAN
INTEST.
PBT OR PROFIT BEFORE TAX
LESS TAXES
PAT OR PROFIT AFTER TAX
LESS TRANSFER TO RESERVES / PREF. DIVIDENDS
PAPD OR PROFIT AFTER PREFERENCE DIVIDENDS
LESS EQUITY DIVIDENDS
RETAINED EARNING
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21. LIABILTY ASSETS
SHARE CAPITAL -1 1+2 = FIXED ASSETS
PREFERENCE SH. Proprietor fund
CAPITAL or
Share holder fund
EQUITY SHARE CAPITAL
or
Net Worth
RESERVES & SURPLUS -2 or
Internal Equity
GENERAL RESERVE
P/L A/C (RETAINED CURRENT
EARNING) ASSETS
1 +2+3 =
LONG TERM DEBTS -3 Long term Funds
Or
LOAN ON MORTGAGE
Total Investment
BANK LOAN
Or
DEBENTURES Capital Block
CURRENT LIABILITIES -4 3+4= External Equity
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38. Overall Profitability analysis
1).Return on Propritors fund
=PAT / Propritors fund
2). Return on equity capital
= PAPD / Equity capital
3). Return on total investment
= EBIT / Total investment
4). Return on Total assets
= EBIT / Total assets
All above are in percentage(%)
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