Decision-Making using Financial Ratios

di Mqondisi Bhebhe
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107 pages
The simplest guide in calculating, interpreting and analysing financial ratios. Suitable for students at all levels and beginners in Accounting; you’ll improve your grades in just 7 days.
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Ever been asked to analyse the performance of a big company and given long lists of financial figures, finding it hard to interpret them? Well, here is a step-by-step guide designed to simplify the calculation, interpretation and implementation of financial ratios in major decision-making situations. This volume uses simple equations, definitions, formulas and thorough explanations on how financial data can be turned into easily understandable ratios. Go through the definitions and examples herein and you will see the improvement in your marks in just 7 days! 

About the author

Mqondisi Bhebhe is an academic, a Management graduate and published author in various disciplines, but with more emphasis on Academic Writing skills and Business/Economics. He has been, and still is, teaching at tertiary level and enjoys sharing his knowledge and experience with readers from all over the world. This is the third of the five upcoming editions of the ‘simplified’ series, with the first two already published. From the author of the Human Resource Management Solutions Textbook and the Academic Writing Guide for University Students, here is another comprehensive but simplified guide to using financial ratios in a practical setup, aiming to make studying easier for you. Please enjoy this work and look out for the next volumes.

  • About the author
  1. Introduction
    1. The Accounting cycle 
    2. The balancing game 
    3. Users of Financial Ratios 
    4. Types of Financial statements used for ratio analysis 
    5. Advantages of Financial ratios 
    6. Main classes of Financial Ratios
  2. Profitability Ratios
    1. Chapter focus
    2. Retention Rate 
    3. Return on Assets Ratio 
    4. Times Interest Earned Ratio 
    5. Return on Equity Ratio 
    6. Return on sales ratio 
    7. Operating Margin Ratio 
    8. Net Profit Ratio (N.P.R) 
    9. Operating Ratio 
    10. Share price to earnings ratio 
    11. Share Earning-Price Ratio 
    12. Dividend Payout Ratio 
    13. Earnings per Share 
    14. Ways to Improve Profitability 
    15. Limitations of Profitability ratios 
  3. Debt and Risk Ratios 
    1. Chapter focus
    2. The Importance of Calculating Solvency 
    3. Repayment Capacity 
    4. Debt Service Coverage Ratio 
    5. Proprietary Ratio 
    6. Fixed Assets turnover Ratio 
    7. Current Assets to Shareholders’ funds 
    8. Capital Gearing Ratio 
    9. Debt to Equity Ratio 
    10. Total Debt to Assets 
    11. Interest Coverage Ratio 
    12. How To Improve Solvency 
    13. Limitations of solvency ratios 
  4. Liquidity Ratios 
    1. Chapter focus 
    2. Signs of liquidity problems 
    3. Liquidity Ratios 
    4. Doubtful Debt Percentage 
    5. Collections percentage of Net Revenue
    6. Days Cash on Hand 
    7. Days in Accounts Receivable 
    8. Average Payment Period 
    9. Inventory Turnover Ratio 
    10. Working Capital to Sales 
    11. Days Sales Outstanding Ratio 
    12. Days Sales in Inventory 
    13. Cash Ratio 
    14. How to Imrpove Liquidity 
    15. Limitations of liquidity ratios 
  5. Efficiency Ratios 
    1. Chapter focus 
    2. Signs of Efficiency problems
    3. Efficiency Ratios 
    4. Operating expense ratio 
    5. Operating Expenses to Sales 
    6. Debtors/Receivables Turnover Ratio 
    7. Fixed Assets Turnover Ratio 
    8. Total Assets Turnover Ratio 
    9. Total Assets to Sales 
    10. Labor to Net Sales Ratio
    11. Accounts payable turnover ratio
    12. How to Improve Efficiency 81
    13. Limitations of Efficiency Ratios 
  6. Activities and Analysis 
    1. Question 1   
    2. Worked solution 
    3. Question 2 
    4. Worked solution 
  • Summary 
  • Conclusion: Limitations of financial ratios 
  • Reference List