Financial Ratio Analysis

Notes | the cash flow analysis should be considered in all the below ratios |

  | Income Statement Rations |

EBIT | Earning before income tax |

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EBITDA | EBITDA, which stands for "Earnings Before Interest, Taxes, Depreciation, and Amortization |

| EBITDA is a way of evaluating company by excluding other expenses do not related the company main industry |

| For industries that requirs a huge investment and infrastructure, EBITDA ican be more approperate because of excluding the investment expenses |

EBIAT | Earning before interest and after tax |

NOPAT | Net Operating Profit After Ttax |

Expenses Ratios | All expenses ratios to Sales which present how the expense ia magnituded |

Contribution Margine | A cost accounting concept that allows a company to determine the profitability of individual products. |

| =(Product revenue - Variable Cost)/Product recevenue |

| In retail, the Gross Margin Percent is recognized as the Contribution Margin Percent. The contribution margin information can be used to add or remove products and product lines or to make informed pricing decisions. |

| Through the contribution margine, the break even point can be easly calculated |

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  | Resources Management Ratios |

Asset Turnover = ATO | Sales revenue amount generated be each dollar of asset |

| = Asset / Sales |

| This ratio can be distortion, because may be the asset is old so it gives a very low ratio, and vise versa if the assets is new, also in some industries where the asset is highly appreciated like construction, then this ratio will be distorted |

| The net asset (Total Asset - Current Liabilities ) can be used instead of total asset, because the current liabilities is operational by its nature, then the net asset is presenting the asset used in operations.This concept is especially important for trading firms, where

the size of accounts payable owed suppliers is quite significant in the total balance

sheet |

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