How to Calculate NBP Financial Ratio

Sunday, July 10, 2011

How to Calculate NBP Financial Ratio

One reason financial (or book ratio) is a relative magnitude of the two selected numerical values taken from the financial statements of a company. It is often used in accounting, there are many reasons standard used to try to evaluate the general financial condition of a company or other organization. Financial ratios can be used by managers within a company, current and potential shareholders (owners) of a company, and creditors of the company. Security analysts use financial ratios to compare the strengths and weaknesses in various companies. [1] If a company's shares are traded on a financial market, the market price of shares used in certain financial ratios.

Ratios can be expressed as a decimal value like 0.10, or given as an equivalent percent, as 10%. Some relationships are usually quoted in percentage terms, especially ratios are usually or always less than 1, as the revenue performance, while others are often cited as decimal numbers, particularly in relation to often more than one, as the P / E ratio, which the latter are also called multiples. Given any relation, it can take its reciprocal, and if the ratio was above 1, the reciprocal is less than 1, and vice versa. Reciprocity is expressed the same information, but can be more understandable: for example, the revenue performance can be compared with bond yields, while the P / E ratio can not be, for example, a P / E of 20 corresponds to an earnings yield of 5%.

Purpose and types of ratios

Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial indicators are classified according to the financial aspect of the company that measures of proportion. Liquidity ratios measure the availability of cash to pay off debt [2]. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. [3] Debt ratios measure the company's ability to repay long term debt [4]. Profitability ratios measure the use of firm assets and controlling expenses to generate an acceptable rate of return. [5] ratios measure the market response of investors to hold shares in a company and also the cost of issuing shares. [6] These refer to the return on investment for shareholders, and the relationship between return and the value of an investment in company stock.

Financial ratios allow for comparisons

between companies
between industries
between different periods of time for a company
between one company and its industry average

Ratios generally have no meaning unless compared with something else, such as past performance or other company. Therefore, the relations of companies in different industries, which face different risks, capital requirements, and competition are often difficult to compare