MODULE 2 - Management Science-II Prof. R.Madumathi MODULE 2...

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Management Science-II Prof. R.Madumathi Indian Institute of Technology Madras MODULE 2 Business Analysis Types Of Business Analysis Comparative Statements Ratio Analysis Break Even Analysis Comparative Statements Comparative statements present the accounts of two or more consecutive years side by side, such that an absolute comparison of the financial statement position of a business enterprise can be made. The comparative statements also indicate the percentage change over the previous year. This indicates the upward or downward trend of specific accounts in the balance sheet.
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Management Science-II Prof. R.Madumathi Indian Institute of Technology Madras Comparative Statement Particulars AmountAmount%change ASSETS 60,000 68,000 13.3% Land and Buildings 15,000 12,000 - 20% Plant and Machinery 25,000 35,000 40% Stock 5,000 6,000 -20% Debtors 12,000 14,000 16.7% Cash and Bank balance 3,000 1,000 -66.7% LIABILITIES 20,000 25,000 25% Creditors 2,000 6,000 200% Term Loan 8,000 12,000 50% Debentures 10,000 7,000 30% CAPITAL 40,000 43,000 7.5% Share capital 20,000 25,000 25% Preference capital 15,000 15,000 0% Reserves 5,000 3,000 -40% Ratio Analysis The relationship between two relevant accounting information is termed as a ratio. Ratios are hence relative measures and help in business enterprise evaluation across years, enterprises, and industries. Types Of Ratios Profitability Ratios Liquidity Ratios Turnover Ratios Leverage Ratios Market Measure Ratios
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Management Science-II Prof. R.Madumathi Indian Institute of Technology Madras Profitability Ratios Net Profit Ratio Higher the net profit ratio better the operational performance of the company. An increase in the net profit ratio is always viewed positively. Return on Investment An improvement in the return on investment is viewed favorable by the company. When the ratio is higher than the industry standard / expected ratio, the company’s profitability position will be considered good.
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Management Science-II Prof. R.Madumathi Indian Institute of Technology Madras
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Management Science-II Prof. R.Madumathi Indian Institute of Technology Madras Liquidity Ratios Current Ratio The current ratio indicates the solvency position of a company. The higher the current ratio the safer the solvency poison of the company. This
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MODULE 2 - Management Science-II Prof. R.Madumathi MODULE 2...

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