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Essential Financial Ratio Analysis Guide

Ratio analysis is a tool used to analyze financial statements by comparing different data points. It was first introduced in 1919 and remains widely used. Aging schedules show the relationship between a company's invoices, bills, and their due dates, helping analyze accounts payable and receivable. Trend analysis in technical analysis predicts future stock movements based on past data and trends over short, intermediate, and long time periods. Pearson's correlation coefficient measures the correlation between two variables from -1 to 1. The schedule of changes in net working capital compares current assets and liabilities over time to identify changes in the working capital position.

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109 views3 pages

Essential Financial Ratio Analysis Guide

Ratio analysis is a tool used to analyze financial statements by comparing different data points. It was first introduced in 1919 and remains widely used. Aging schedules show the relationship between a company's invoices, bills, and their due dates, helping analyze accounts payable and receivable. Trend analysis in technical analysis predicts future stock movements based on past data and trends over short, intermediate, and long time periods. Pearson's correlation coefficient measures the correlation between two variables from -1 to 1. The schedule of changes in net working capital compares current assets and liabilities over time to identify changes in the working capital position.

Uploaded by

Mythili Muthappa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd

Ratio Analysis Ratio analysis is one of the tools valuable for the analysis of financial statement.

It was first suggested to be used in 1919 by a German scholar, named Alexandra Wall. It is the most widely used method for the analysis of financial statements. o doubt contains the items relating to the !"# and the financial $osition of the concern will not be much of use, if they are considered inde$endently. %hey will be very useful only when one item is considered in the light of another item

Aging Schedule An accounting table that shows the relationshi$ between a com$any&s bills and invoices and its due dates. 'ften created by accounting software, aging schedules can be $roduced for both accounts $ayable and accounts receivable to hel$ a com$any see whether it is current on its $ayments to others and whether its customers are $aying it on time.

Trend Analysis An as$ect of technical analysis that tries to $redict the future movement of a stoc( based on $ast data. %rend analysis is based on the idea that what has ha$$ened in the $ast gives traders an idea of what will ha$$en in the future. %here are three main ty$es of trends) short*, intermediate* and long*term.

Karl Pearsons Correlation Co-Efficient +arl !earson&s !roduct*,oment -orrelation -oefficient or sim$ly !earson&s -orrelation -oefficient for short, is one of the im$ortant methods used in .tatistics to measure -orrelation between two variables. %he -orrelation between two variables / and 0, which are measured using !earson&s -oefficient, give the values between 11 and *1.

Schedule of Changes in Net Working Capital et wor(ing ca$ital is excess of current assets over current liabilities, the increase or decrease in the net wor(ing ca$ital can be found out by com$aring the current assets and current liabilities contained in the balance sheets of two following dates. 2or this $ur$ose, a statement is $re$ared which is called statement or schedule of changes in net wor(ing ca$ital. %his statement hel$s to identify the change in $osition of the wor(ing ca$ital.

While $re$aring the statement of changes in wor(ing ca$ital,the following $oints are ta(en into account. 3 Increase in current assets, increase in net wor(ing ca$ital 3 4ecrease in current assets, decrease in net wor(ing ca$ital 3 Increase in current liabilities, decrease in net wor(ing ca$ital 3 4ecrease in current liabilities, increase in net wor(ing ca$ital

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