What is the financial ratio❓

What is the financial ratio❓

For this article, we would like to offer some tips about financial ratios that this is something to leave each other. If you're ready, let's go see it.

🔸 Get to know financial ratio

Financial ratios are those that are present within the financial statements. bring to find ratios to be used in comparison with other businesses or make comparisons with past performance This will help the analyst to evaluate the performance. and the trends and risks of the business better which can be divided into the following types:

- liquidity ratio

- Ratio of working capital

- Fast turnover ratio

- cash ratio

- Receivable turnover rate

- The first phase of debt collection

- turnover rate of inventories

Asset Efficiency Ratio

- Total Asset Turnover

- Fixed asset turnover rate

Profitability Ratio

- gross profit margin

- Operating profit margin

- net profit margin

- Return on all assets

- Return on Equity

debt repayment ability ratio

- Debt to Equity Ratio

- the ratio of interest payable ability

- Dividend payout rate

🔸 By asking to explain in parts

Working capital ratio is the ratio between current assets and current debt. This will indicate the liquidity of the entity in order to settle the liabilities in a short period of time. If this ratio is less than 1, it means that the entity has more current liabilities than current assets, which can cause problems with short-term debt settlement.

The working capital ratio is the ratio adjusted from the working capital ratio. In which the calculation will not take the remaining inventories to be combined with other current assets. for example Trade accounts receivable and marketable assets This is because inventories can be converted to cash more slowly. and may still have a value that is lower than book value This makes the working capital ratio faster that can better tell the liquidity of the business than the working capital ratio.

How are you? Hope this article will be useful for all readers and see you in the next article.

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