FINANCIAL PLANNING & ANALYSIS Part - 1


Financial Planning and Analysis is carried out to ascertain the financial strength and weakness of an enterprise.
The main tools are Ratio Analysis and Cash flow and Funds Flow analysis.
Ratio Analysis:
Ratio Analysis is the comparison of different numbers from the balance sheet, Income Statement and Cash Flow statement against the figures of previous years, other companies, the industry or even the economy in general for the purpose of financial analysis.
Ratio Analysis can be classified into four broad categories


Liquidity Ratio:
It derives the liquidity or short term solvency means ability of the business to pay its short term liabilities.



Leverage Ratio: This is also known as Capital Structure. This may be defined as the ratio which measures the long term stability and structure of the firm. This can be further derived in two parts known as:
(I)            Capital Structure Ratios
(II)          Coverage Ratios


Activity Ratios: It evaluates the efficiency with which the firm manages and utilizes its assets.


Working Capital Turnover Ratio is further segregated into 3 Types.





Profitability Ratio: It evaluates the profitability and operational efficiency of the firm. There are several Profitability Ratios (About 10 types) . Here I am Describing some of the Important Ratios.




We will discuss Cash flow and funds flow analysis in the second part.

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