Ratio Analysis - Mind Map

Mind Maps have been produced to introduce topics and give students an overview of key topics being studied. The maps can be viewed as a whole page or, for those who prefer a more linear approach, as a text version.

Liquidity
- How solvent is the business?
- Acid Test
  - Quick ratio
  - Current assets - stock : liabilities
  - 1:1 seen as ideal
- Current Ratio
  - Assets to Liabilities
  - Too high - too much stock
  - Too low - risk of not being able to pay your way
Investment/Shareholders
- Earnings per share
- Dividend Yield
- What is the extent of the risk?
- What is the likely return?
- Generally - higher the better
Gearing
- Financial position
- Loans/Capital
- High gearing - Loans > Capital
Profitability
- Profit in relation to sales/assets
- Profit Margins
- Return on Capital
- Higher the better (in general)
Financial
- Asset Turnover
  - Using assets to generate profit
- Stock Turnover
  - Increased efficiency?
  - Poor customer satisfaction?
- Debtor Days
  - Shorter the better

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