Return on Assets

Return on Assets Return on Assets ratio indicates how profitable a company’s assets are in generating revenue. This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not and how to utilize properly. Return on assets is an indicator … Read more

Return on Capital Employed

Return on Capital Employed Return on Capital Employed ratio is an indicator of the earning capacity of the capital employed in the business.This ratio is considered to be the most important ratio because it reflects the overall efficiency with which capital is used. How to Calculate Return on Capital Employed? It is calculated as follows: … Read more

Net Profit Ratio

Net Profit Ratio is the ratio of net profit after tax to net sales. It explains per rupee profit generating capacity of sales. This ratio is a measure of the overall profitability net profit is arrived at after taking into account both the operating and non-operating items of incomes and expenses. This ratio is very … Read more

Operating Profit Ratio

Operating Profit ratio express the relationship between operating profit and sales and calculated as follows: Where Operating Profit = Net Profit + Non-operating expenses – Non-operating Income Or =Gross Profit – Operating Expenses Operating profit ratio can also be calculated with the help of operating ratio as follows: Operating Profit Ratio = 100 – Operating … Read more

Gross Profit Ratio : Gross Profit Margin Analysis

The gross profit ratio tells gross margin on trading. It is the gross profit expressed as a percentage of total sales and calculated as follows: Gross profit is taken before tax and other indirect costs.Net sales means that sales minus sales returns. Gross profit would be the difference between net sales and cost of goods … Read more

Profitability Indicator Ratios: Introduction

Profitability ratios are of utmost importance for a concern. These ratios give users a good understanding of how well the company utilized its resources in generating profit and shareholder value and helpful to efficient and effective utilization of resources. This section of the tutorial discusses the different measures of corporate profitability and financial performance. NEXT … Read more

Liquidity Measurement Ratios: Introduction

If it is decided to study the liquidity position of the concern, then liquidity ratios are calculated. These ratios are used to measure the firm’s ability to meet short term obligations. From these ratios, much insight can be obtained into the present cash solvency of the firm and the firm’s ability to remain solvent in … Read more

Current Ratio

What is Current Ratio? Current Ratio is the most widely used ratio. It compares a firm’s current assets to its current liabilities. It shows a firm’s ability to cover its current liabilities with its current assets. It is expressed as follows: For example, if ABC Company’s current assets are Rs. 50,000,000 and its current liabilities … Read more

Difference Between Cost Accounting And Management Accounting

Cost accounting and Management accounting both have the same objectives of helping the management in planning, control and decision making. Both are internal to the organisation and use common tools and techniques . Inspite of these similarities there are following differences: Difference Between Cost Accounting And Management Accounting Cost Accounting Management Accounting Cost Accounting provides … Read more

Zero Base Budgeting

Zero Base Budgeting Zero base budgeting (ZBB) is a  method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a “zero base” and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless … Read more