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What is the importance 1- current ratio 2 - equity profit ratio 3 - fixed assets turnover R 4 - inventory turnover R 5 - gross profit margin R

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Question added by Deleted user
Date Posted: 2014/09/21
wasiq waheed
by wasiq waheed , FRONT OFFICE SUPERVISOR(Looking for a New challenging position In U.A.E) , SHELTON HOTEL

Well i think for me All are important Analysis  to show the financial position of an organization.

Mohamed Esam Mohamed Kamel
by Mohamed Esam Mohamed Kamel , Financial Analyst , Egyptian Water & Wastewater Regulatory Agency (EWRA)

Current ratio:

Indicator of a firm's ability to meet short-term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current-ratios, a ratio of2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets ÷ Current liabilities.

 

Equity profit ratio:

In an annual time frame, the amount of net profit that a business will have after tax, and then divided by the amount of sales that the business has for that same annual time frame. Also called profit margin.

 

Fixed asset turnover ratio:

Measure of the productivity of a firm, it indicates the amount of sales generated by each dollar spent on fixed assets, and the amount of fixed assets required to generate a specific level of revenue. Changes in the this ratio over time reflect whether or not the firm is becoming more efficient in the use of its fixed assets. Formula: Sales revenue ÷ average fixed assets.

 

Inventory turnover:

Number of times a firm's investment in inventory is recouped during an accounting period. Normally a high number indicates a greater sales efficiency and a lower risk of loss through un-saleable stock. However, an inventory turnover that is out of proportion to industry norms may suggest losses due to shortages, and poor customer-service. The preferred method of computing inventory turnover is to compare the cost of sales (also called Cost Of Goods Sold or COGS) to average inventory (Cost of sales ÷ Average inventory). Another method, which compares net sales revenue to the inventory (Net sales revenue ÷ Inventory) is also used but it introduces the distortion of sales markup that is not documented in the inventory records. Also called inventory turns or stock turnover.

 

Gross profit margin:

A measure of a company's profitability that is expressed as a percentage of gross profit. It is calculated by dividing gross profit by revenue.

Khalid Noor
by Khalid Noor , Accounting Manager , FedEx

Agreed with the answer of abed hasan abdulleh othman 

Tanveer Qureshi
by Tanveer Qureshi , Qureshi Associates , Qureshi Associates

All ratios are important in analyzing performance of a company.

Abed Hasan Abdullah  Othman
by Abed Hasan Abdullah Othman , general accountant , Trading company

the  importance  of  current  ratio  to measure the  degree to with current assets cover current liabilities .a higher  ratio indicates greater ability to pay current liabilities with current assets,thus greater liquidity  

current assets = current assets /current liabilities 

equity profit (return on equity ) measure the return made on the common shareholders' equity rather than return on total assets  

ROE = NET INCOME/AVERAGE EQUITY  

inventory turn over  ratio measure the  number of the times that inventory was sold during a year 

inventory turn over ratios =cost of goods sold /average inventory  

fixed assets  turn  over  ratio  it may be useful to  determine the relationship between sales and the investment in fixed or total assets 

fixed assets turn over ratio = sales /average net plant,property and equipment 

gross profit margin  ratio  it measure the company's profitability    which equal sales revenues minus the cost of goods sold 

gross profit margin =sales- cost of  sales  

 

Asim Azaldeen Abdalrahman Mhammed
by Asim Azaldeen Abdalrahman Mhammed , Property Manager , TAAM PROPERTY

Every answer is better than another they are enough answers .. thanks for all

Khan Sohal khan
by Khan Sohal khan , Associate , State Street Syntel Services Pvt Ltd.

And these ratios are important from ROI (return on investment) point of view.

MOHAMED RABIE KHALILL
by MOHAMED RABIE KHALILL , رئيس حسابات , شركة ترانز لاين

ALL ANSWER IMPORTANCE

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