### What is trend analysis?

Trend analysis is a method used in technical analysis that tries to predict the future. Under this system, Revenue and cost information from a company’s income statement is arranged on a trend line for multiple reporting periods and then examined for trends and inconsistencies. The object of trend analysis is to spot actionable patterns from…

### What are Funding Volatility Ratio and Market Liability Ratio?

In banking parlance, volatile liabilities are ‘hot’ or ‘unstable’ funds that can disappear from bank’s balance sheet overnight. Demand deposits are best examples of volatile liabilities which can move out of the bank overnight. Thus, funding volatility ratio (FVR) is calculated by proportion of liquid assets to CASA deposits i.e. FVR=Liquid assets÷ CASA deposits. In…

### What is a liquid asset?

The land, building, machinery etc. are known as non-liquid assets because it can take months for a person or company to receive cash from the sale of such assets. Unlike non-liquid assets, the liquid assets are cash in hand or the other assets which are cash equivalent. In simple words, liquid asset can be described…

### What is the meaning of Ratio Analysis of a financial statement?

The term ratio means a simple division of one number by another. It is measured by the number of times one number is contained by the other, either integrally or in fraction. The ratio analysis of financial statement means the process of calculating structural relations of different items and groups in the financial statements. Generally,…

### Why Ratio Analysis of financial statements is important to bankers?

If any lending decision is to be properly made, the risk involved in the transaction should be properly evaluated. Risk evaluation primarily consists in the ascertainment of the ability of the prospective borrower to repay the proposed loan. To ascertain this ability, apart from financial analysis many other vital considerations such as the character of…

### Ratio analysis of Capital Structure/leverage ratios of a firm

(This article explains the method of computation and the purposes of capital structure ratios viz. Current ratio, Quick ratio/Acid test ratio, Debt Equity Ratio, Solvency Ratio, Proprietary or Equity asset ratio, Fixed assets to tangible net worth plus term debt, Current debt to tangible net worth ratio, Inventory to net working capital ratio, Current debt…

### What are turnover ratios?

The turnover ratios or inter-statement ratios represent the quantity of any assets or liabilities used by a business entity to generate revenue through sales. The concept of turnover ratio is useful in determining the efficiency with which a business utilizes its assets. The following ratios are called Turnover Ratios or inter-Statement Ratios. Debtors’ velocity ratio…

### What are profitability ratios?

Profitability ratios help a business entity as well as the lenders/investors to evaluate the ability to generate income as compared to its expenses and other cost associated with generation of income during a particular period. Profitability Ratios also help the managements in making business decision in respect of expansion or diversification of the business.  As…

### What is cash management?

We find many a  time, companies struggle to meet their day to day operating expenses, not because they failed to generate adequate money out of their business but they were not able to manage their cash. Cash management speaks of a wide-ranging area of finance involving the collection, handling, and usage of cash. It also…

### What are Business earnings, how they are computed?

As we all know, earnings is basically net income after tax or bottom line which determines a business entity’s share price. The earnings of a business entity also provide financial analyst certain yard stick to evaluate the financial condition and performance of a business. The earnings also reflect whether actual performance is good to the…