Law of Success

MODULE - 6A Analysis of Financial Statements explanation Ratios II Notes 29 ACCOUNTING RATIOS II You flummox pick outt in the previous lesson that account ratios can be sort into five major groups that is to say liquidity ratios, action mechanism ratios, solvency ratios, gainfulness ratios and leverage ratio. You have already learnt the considering, computations and significance of liquidity and activity ratios. In this lesson, you will learn about the diverse solvency ratios, profitableness ratios and leverage ratio and their significance. OBJECTIVES afterwards studying this lesson you will be able to : explain various types of accounting ratios i.e. solvency, profitability and leverage ratios; calculate the various ratios on the basis of given entropy; describe the limitations of accounting ratios. 29.1 SOLVENCY RATIOS The marge solvency refers to the ability of a business enterprise to run its pertinacious edge obligations. The long- enclosure liability of a home is towards debenture bond holders, financial institutions providing medium and long term loans and other creditors marketing goods on credit. These ratios indicate firms ability to meet the fixed interest and its costs and quittance schedules associated with its long term borrowings. The following ratios serve the purpose of ascertain the solvency of the business firm.

Debt truth ratio Proprietary ratio 42 ACCOUNTANCY Accounting Ratios II Debt-equity ratio It is also otherwise known as away to internal equity ratio. It is calculated to know the telling claims of outsiders and the owners against the firms assets. This ratio! establishes the relationship between the outsiders financial resource and the sh areholders fund. Thus, Outsiders funds Share holders funds The two canonical components of the ratio are outsiders funds and considerholders funds. The outsiders funds include each debts/liabilities to outsiders i.e. debentures, long term loans from financial institutions, etc. Shareholders funds mean preference share capital,...If you want to get a salutary essay, order it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper