ACCA P3主要內容：Ratio Analysis

1 Purpose

Calculating and analysing the ratios for a company can help financial statement users by:

Providing a uniform measurement which will act as an indicator of:

areas for further investigation in the current period; and

the pattern of results over a series of periods (i.e. trend analysis).

Summarising large quantities of financial data into information that can be used to make qualitative judgments about an entity's financial performance.

Reducing financial data to fewer expressions of variables which is useful when:

the relationship between amounts is of interest (rather than absolute monetary amounts); and

the information generated will be reviewed over time (as in trend analysis).

Indicating areas in which the entity may be strong or weak (rather than evaluate financial performance in "good/bad" terms).

2 Comparisons

Typically comparisons are made between:

previous and current periods (historical comparison);

target or budgeted (and/or standard) and actual figures; and

other companies/industry averages, etc (market comparison).

For comparisons to be meaningful they should be based on amounts that are functionally related. For example, bad debt expense is a function of accounts receivable rather than revenue (so a percentage of accounts receivable will be preferable for analysis).

3 Expressing Ratios

There are various methods of expressing ratios:

Pure or absolute ratio (e.g. current assets to current liabilities is 1.7:1)

A rate or multiple (e.g. current assets are 1.7 times current liabilities)

A percentage (e.g. current assets are 170% of current liabilities)

4 Interpretation of Ratios

Although individual pure ratios have limited use, to know that current assets to current liabilities is less than one may indicate an insolvent financial position.

Groups of ratios can be better interpreted by considering the interrelationships (e.g. between liquidity and profitability).

Historical comparisons help to reveal trends. As when making any projections, great care must be taken in projecting trends.

However, identifying deviations from trends may be useful in identifying a need for corrective action.

When making inter-firm comparisons between companies in the same industry (e.g. to benchmark performance), it may be necessary to make adjustments for different accounting policies being used (e.g. if similar assets are depreciated over significantly different periods).