Bank Statement Explained
Jennifer edwards A bank statement is a kind of financial statement that is issued by the banks to the companies or individual customers once in the month to show the financial transactions…
Income Statement Explained
Income statement is one of the most important of financial statements and it’s also known as profit and loss statement. It is also known as statement of operations and statement…
Inventory Turnover Ratio or Stock Turnover Ratio (ITR)
Shamsa Rafique Inventory Turnover Ratio or Stock Turnover Ratio (ITR) : Every firm has to maintain a certain level of inventory or stock of finished goods so as to be able to…
Working Capital Turnover Ratio
Sidra Farid Working Capital Turnover Ratio: Definition: Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is…
Vertical Analysis and Common Size Statements
Sana Ahmed Vertical Analysis and Common Size Statements: Definition and Explanation of Vertical Analysis and Common Size Statements: Vertical analysis is the procedure of preparing and presenting common size statements. Common size…
Trend Percentage
Trend Percentage: Definition and Explanation: Horizontal analysis of financial statements can also be carried out by computing trend percentages. Trend percentage states several years' financial data in terms of a…
Return on Equity Capital (ROEC) Ratio
Abida Rehman In real sense, ordinary shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a preference over ordinary shareholders in…
Return on Capital Employed Ratio (ROCE Ratio)
Return on Capital Employed Ratio (ROCE Ratio): The prime objective of making investments in any business is to obtain satisfactory return on capital invested. Hence, the return on capital employed…
Return on Shareholders Investment or Net Worth Ratio
Return on Shareholders Investment or Net Worth Ratio: Definition: It is the ratio of net profit to share holder's investment. It is the relationship between net profit (after interest and…
Over trading and Under Trading
Over-trading and under-trading are facets of over and under-capitalization. Over trading is a curse to the business. Over Trading : A company which is under-capitalized will try to do too…
Over-capitalization and Under-capitalization
Over-capitalization and Under-capitalization: The total amount of funds available to an undertaking should be neither too much nor too low. An important question, therefore is the question of capitalization of…
Dividend Yield Ratio
Dividend Yield Ratio: Definition: Dividend yield ratio is the relationship between dividends per share and the market value of the shares. Share holders are real owners of a company and…
Dividend Payout Ratio
Dividend Payout Ratio: Dividend payout ratio is calculated to find the extent to which earnings per share have been used for paying dividend and to know what portion of earnings…
Operating Ratio
Definition: Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations…
Limitations of Financial Statement Analysis
Limitations of Financial Statement Analysis: Although financial statement analysis is highly useful tool, it has two limitations. These two limitations involve the comparability of financial data between companies and the…
Inventory Pricing and Interim Financial Reporting – Inventory Valuation
Companies should generally use the same inventory pricing methods or interim financial reporting and make provisions for write downs to make market at interim dates on the same basis as…
Debt Service Ratio or Interest Coverage Ratio
Debt Service Ratio or Interest Coverage Ratio: Definition: Interest coverage ratio is also known as debt service ratio or debt service coverage ratio. This ratio relates the fixed interest charges…
Current Ratio
Current Ratio: It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is…