Question

Comment on every ratio according to your perception?

leverage ratios

liquidity ratios

profitability ratios

operations ratios

Answer 1

A. Leverage ratio in presence of debt capital in the overall capital structure and leverage ratio will be telling about the insolvency risk which is attached to the operations of the company and when the company will be having a higher amount of debt capital in its overall capital structure then it will be prone to insolvencies and leverage ratios will be indicating that.

B. Liquidity ratio is the presence of liquid assets in the overall organisation which will be representative of cash and cash equivalents along with receivables within one year and all such current assets after adjustment with the current liabilities so that the company will have a higher amount of liquidity in their hands in order to discharge their obligations and the company will be having an optimum flexibility so a higher amount of flexibility ratio is always desired.

C. Profitability ratios of the company will be indicating the overall profits which are made by the company and it will also indicate the level of gross profit and net profit as well as operational profit in the organisation and it will indicate the ability of company to increase its reserve and surplus.

D. operational risk will always be reflecting the efficiency of the business and they will always try to enhance the overall efficiency in order to maximize the overall sales and profits of the company so, operational ratios are including asset efficiency ratios and other ratios which will help the organisation in order to maximize their revenues and profits.