Scribd
Upload
16 views

Financial Analytics- BA

The document outlines key financial metrics used in financial analytics, including profitability, liquidity, solvency, efficiency ratios, and others. Each metric is defined with its purpose, key ratios, importance, and examples for clarity. These metrics help stakeholders assess a company's financial health and operational performance.

Uploaded by

rajeshkumar24082k1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
16 views

Financial Analytics- BA

The document outlines key financial metrics used in financial analytics, including profitability, liquidity, solvency, efficiency ratios, and others. Each metric is defined with its purpose, key ratios, importance, and examples for clarity. These metrics help stakeholders assess a company's financial health and operational performance.

Uploaded by

rajeshkumar24082k1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Key Metrics in Financial Analytics.

1. Profitability Ratios
 Purpose: To assess a company’s ability to generate profit from its operations.
 Key Ratios: Gross Profit Margin, Net Profit Margin, Return on Equity (ROE).
 Importance: It shows how well the company converts sales into profits, helping stakeholders understand the firm's profitability.
 Example:
o Net Profit Margin: Net Income / Revenue.
If a company has Rs.500,000 in net income and Rs.50,00,000 in revenue, the net profit margin is 10%.
2. Liquidity Ratios
 Purpose: To measure a company’s ability to pay off its short-term liabilities with its short-term assets.
 Key Ratios: Current Ratio, Quick Ratio.
 Importance: It helps assess if the company can meet short-term obligations, which is vital for creditors and investors.
 Example:
o Current Ratio: Current Assets / Current Liabilities.
If a company has Rs.30,00,000 in current assets and Rs.15,00,000 in current liabilities, the current ratio is 2.0.
3. Solvency Ratios
 Purpose: To evaluate a company’s ability to meet its long-term debts.
 Key Ratios: Debt-to-Equity Ratio, Interest Coverage Ratio.
 Importance: It indicates financial stability and the company’s reliance on debt financing, crucial for understanding long-term
financial health.
 Example:
o Debt-to-Equity Ratio: Total Debt / Total Equity.
If a company has Rs.40,00,000 in debt and Rs.20,00,000 in equity, the debt-to-equity ratio is 2.0.
4. Efficiency Ratios
 Purpose: To assess how well a company uses its assets and liabilities to generate sales and maximize profits.
 Key Ratios: Asset Turnover, Inventory Turnover.
 Importance: It helps in determining how effectively a company is using its resources.
 Example:
o Asset Turnover: Net Sales / Total Assets.
If a company generates Rs.20,00,000 in sales with Rs.10,00,000 in total assets, the asset turnover ratio is 2.0.

5. Return on Assets (ROA)


 Purpose: To measure how efficiently a company is using its assets to generate profit.
 Formula: Net Income / Total Assets.
 Importance: A higher ROA indicates efficient use of assets in generating earnings.
 Example:
If a company has Rs.3,00,000 in net income and Rs.20,00,000 in assets, the ROA is 15%.

6. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)


 Purpose: To evaluate the operating performance by excluding the effects of financing and accounting decisions.
 Formula: Operating Income + Depreciation + Amortization.
 Importance: It gives a clearer view of core operational profitability.
 Example:
If a company has Rs.10,00,000 in operating income, Rs.2,00,000 in depreciation, and Rs.1,00,000 in amortization,
EBITDA is Rs.13,00,000.
7. Operating Cash Flow (OCF)
 Purpose: To measure the cash generated by a company’s core operations.
 Formula: Net Income + Non-Cash Expenses (Depreciation, Amortization) + Changes in Working Capital.
 Importance: It shows the cash available to pay dividends, reinvest in the business, or reduce debt.
 Example:
If a company has Rs.500,000 in net income, Rs.1,00,000 in depreciation, and no change in working capital, OCF is
Rs.6,00,000.

8. Price-to-Earnings (P/E) Ratio


 Purpose: To value a company by comparing its current share price to its per-share earnings.
 Formula: Market Price per Share / Earnings per Share (EPS).
 Importance: It helps investors assess if a stock is overvalued or undervalued relative to its earnings.
 Example:
If a company's stock price is Rs.50, and its earnings per share are Rs.5, the P/E ratio is 10.

You might also like