Statement Analysis Tools and Accounting Ratios Test - 2

It is a capital loss, therefore do not comes under any expense category.

Low current ratio indicates that business has more liability but less amount to pay off. It means business may face difficulty in meeting its short term liabilities.

Solvency ratios indicates the company's ability to meet long term debts while quick ratio indicates the company's ability to meet short term debts.

Long term funds employed in the business are also known as Capital Employed. i.e. Share capital + Reserves and Surplus + long term borrowings + Long term provisions

Accounting Ratio is also called financial ratios provide a way of expressing the relationship between one accounting data point and another which is intended to provide a useful comparison.

Net Profit Ratio is the ratio of after tax profits to net sales. It reveals the remaining profit after all costs of production , administration, and financing have been deducted from sales, and income taxes recognized.

Financial statement analysis is a post mortem of business transactions. Because it involves analysis of each and every transactions in detail.

Common Size financial statement is Vertical Analysis of financial statements in which each account is expressed as a percentage of the value of sales. It enables easy analysis between companies or between time periods of a company.

working capital turnover ratio is also referred to as net sales to working capital. It shows the company's effectiveness in using its working capital.

Liquid ratio is a ratio that measures a company's ability to pay short term and long term obligations. This is done by comparing a company's most liquid assets, those that can be easily converted to cash, with short term obligations.