**Lecture No.1:**

**MEANING OF RATIOS**

**Comparison of Two Figures is called Ratio. In this lecture you will be know about Meaning of Ratio and Types of Financial Ratios. So lets start to know about Financial Ratios**

We discussed here two things in Financial Ratio Analysis lecture 1:

1- Importance of Financial Ratio Analysis

2- Uses of Financial Ratios

Classifications of Ratios will discuss in the next video.

& also you will find solutions of Financial Ratio problems in the next coming videos. Hope you like this video 🙂

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**👉 ****❤ FINANCIAL RATIO ANALYSIS ❤ Play List ❤
**Playlist_Ratio_Analysis

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**Lecture No.2: Classification of Ratios**

**In this lecture you will know about the classification of Ratios. You will know about the Short-Term-Financial or Solvency Position**

**You will understand that Liquidity refers to the Ability of a firm to Pay off its Current obligations as and when they become due.**

**1:Liquidity Ratios are used to determine how quickly and easily a company can convert into cash.**

**The Company will be in Financial Troubles, if it fails to convert its assets into cash, when necessary.**

**The Liquidity Ratio uses information from a firm’s financial statement to measures its liquid assets against its liabilities**

**Examples of Liquidity Ratios are:**

**Current Ratio / Working Capital Ratio****Quick Ratio / Liquid Ratio / Acid Test Ratio****Absolute Liquidity Ratio****Defence****Interval Ratio**

**2 : SOLVENCY / LEVERAGE RATIOS:**

**It Shows the Long-Term-Financial or Solvency Position of the business.**

**Solvency Ratios refers to the ability of company to meet its long-term obligations.**

**Solvency Ratios are used to analyse the Capital Structure of the company.**

**Solvency Ratios are also called “LEVERAGE RATIOS”.**

**Solvency Ratios shows a clear view that, “How much company’s sustainability is based on actual resources and how much is based on debts”.**

**Example of Solvency Ratios are:**

- Debt to Equity Ratio
- Total Debt Ratio
- Proprietory / Equity Ratio
- Fixed Assets Ratio
- Interest Coverage Ratio
- Fixed Assets to Net Worth

**Liquidity Ratios will discuss in the next video.**

& also you will find solutions of Financial Ratio problems in the next coming videos. Hope you like this video 🙂

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**👉**

**❤ FINANCIAL RATIO ANALYSIS ❤ Play List ❤**

Playlist_Ratio_Analysis

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**Accountancy Point**

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**3 : ACTIVITY / EFFICIENCY RATIOS:**

**For Example:**

- Company’s ability to Collect payment from its customers
- Company’s ability to Repay its loans
- Company’s ability to manage its Shareholders’ equ
**ity**

**Activity / Efficiency Ratios can be use to measure:**

- Company’s Assets against its earnings
- The amount it owes to suppliers against its inventory purchases

**Examples of Activity Ratios:**

- Inventory Turnover Ratio
- Debtors Turnover Ratio / Velocity
- Creditors Turnover Ratio / Velocity
- Average Collection Period
- Average Payment Period
- Working Capital Ratio
- Fixed Assets Turnover Ratio

**4 : PROFITABILITY RATIOS**

- Level of Sales
- Its Investment in inventory and other assets
- Its share holders’ investment

**Example of Profitability Ratios:**

- Gross Profit Ratio
- Operating Ratio
- Net Profit Ratio
- Return on shareholders investment
- Earning per share
- Dividend Pay-out Ratio

**Lecture No.3: LIQUIDITY RATIOS**

**In Lecture no. 3, you will understand about Liquidity Ratios and classification of liquidity Ratios.**

**CURRENT RATIO:**

**Current Ratio also known as Working Capital Ratio. It is Liquidity Ratio that checks that either the company has enough resources to meet its Short-Term-Liabilities. Shows relationship between Current Assets and Current Liabilities. IF Current Liabilities Increases and Current Assets are decreases then Ratio will be Less than 1. Ratio Less than 1 shows that company will face problems to paying its short-term-liabilities.**

**Formula of Current Ratio :**

__Current Assets__**Current Liabilities**

**A Satisfactory or Normal Current Ratio = 2 : 1**

**QUICK RATIO/ LIQUID RATIO**

**Formula of Current Ratio :**

__Quick Assets__**Current Liabilities**

**Quick Assets = Current Assets – Inventories**

**A Satisfactory or Normal Quick Ratio = 1 : 1**

& also you will find solutions of Financial Ratio problems in the next coming videos. Hope you like this video 🙂

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**Solvency or Leverage Ratios will discuss in the next video.**& also you will find solutions of Financial Ratio problems in the next coming videos. Hope you like this video 🙂

—————————————————————————

**👉****❤ FINANCIAL RATIO ANALYSIS ❤ Play List ❤**

Playlist_Ratio_Analysis—————————————————————————

**👉 Help ❤ Accountancy Point ❤ Reach Goal of 10,000 Subscriber:****Accountancy Point****—————————————————————————**

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**Lecture No.4:**