# Business Techniques ( Ratio Analysis )

Ratio Analysis analyses the human relationship betwixt 2 variables . Here are unlike types of Ratio Analysis :

**Profitability Ratio****Liquidity Ratio****Shareholder Ratio**

__PROFITABILITY RATIOS__

__The Profitability Ratio :__

**1. Gross Profit Margin**

Gross Profit Margin is the sum of gross profits a concern earn on each expert sold .The higher the number the amend it is for the concern .Gross profits margin is calculated equally follows :

**Gross profits / Sales * 100**

**2. Net Profit Margin**

NPM analyses the human relationship betwixt cyberspace profits in addition to sales . It show how much cyberspace profits a concern become on each expert sold . The higher the cyberspace profits is the amend it is for the concern .

It is calculated equally follows :

**Net Profit / Sales * 100**

**3. Return On Capital Employed ( ROCE )**

ROCE demo the best surgery of a concern it demo the supply to possessor on their investment .

It is calculated equally :

**Net profits / Capital Employed * 100**

__LIQUIDITY RATIOS__

Liquidity Ratio analyses the liquidity seat of a concern . It stair out the mightiness of a concern to pay its brusque term debts . If the concern is able to come across its brusque term debts this signifies that the concern get got a expert liquidity seat . There are ii types of liquidity ratio those are :

**Current Ratio****Acid Test Ratio**

**1. Current Ratio**

If the ratio is less than one that signifies that concern does non get got sufficient electrical flow property to pay its electrical flow liabilities . Thus it volition be unable to pay its brusque term debts . Therefore the concern volition get got liquidity problems

If the ratio is equal to one , this hateful that the concern volition live on able to pay its brusque term debts but if unforeseen expenses locomote on the concern volition non live on able to come across upwardly the additional expenses .

If the concern ratio is greater than one but less than 2 this hateful that the concern volition live on able to pay brusque term debts equally good equally come across additional expenses .

Current Ratio is calculated equally follows :

**Current Asset / Current Liabilities**

**2. Acid Test Ratio**

Acid Test Ratio is too known equally Quick Ratio . It is a liquidity ratio that get got into consideration those electrical flow property which are to a greater extent than liquid in addition to ignore those which are less liquid . Acid exam ratio is calculated equally follows :

**Current Asset - Inventory / Current Liabilities**

__SHAREHOLDER RATIO__

Shareholder Ratio is too know equally Investment Ratio . This ratio demo the prospect of fiscal attain .

It comprise three ratios , those are :

**Dividend Yield Ratio****Dividend Cover Ratio****Price Earning Ratio**

**1. Dividend Yield Ratio**

This ratio demo supply on investment . It is calculated equally follows :

**Dividend per percentage / marketplace cost * 100**

**2. Dividend Cover Ratio**

This ratio demo the number of fourth dimension profits covers dividend per twelvemonth . The higher the number the amend it is . It is calculated as follows :

**Profit for the twelvemonth / annual dividend**

**3. Price Earning Ratio**

It is a vital ratio for shareholder in addition to investors . It shows the confidence inwards the futurity prospect inwards the concern . It is calculates equally follows :

**Current Share Price / Earning Per Share**

Those are the of import which are used yesteryear concern in addition to thus equally to accomplish their success .

Credit : BI

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