Financial Ratio

5th International Conference on Management, Enterprise and Benchmarking June 1-2, 2007 Budapest, Hungary Uses and Limitations of positiveness Ratio Analysis in Managerial Practice ?ubica Lesáková Faculty of Economics, Matej vitamin B University Tajovského Street 10, 975 90 Banská Bystrica Slovak Republic E-mail: lubica.lesakova@umb.sk snatch: The evaluation of profitability exertion appears an important lesson for our managers. Numerical measures of performance atomic number 18 valuable tools, but their use must be kept in perspective. It is short-sighed to manage strictly by the numbers. Executives carry to take broader, more qualitative view of the evaluation process. Firms are too complicated to allow the substitution of mechanical rules for germinal thought. In my paper will be presented the quantitative and qualitative approach to the profitability ratio analysis, as well as the uses and limitations of profitability ratios in managerial practice. 1 Profitability Ratios Profitability ratios snap off the company´s ability to earn a okay profit and guide on investment. The ratios are an indicator of obedient financial health and how effectively the company in managing its assets. reappearance on Total Assets. The ratio of net income to total assets measures the subject on total assets (ROA) after interest and taxes.

The ratio indicates the effeciency with which forethought has used its resources to obtain income: pull in profit after taxes replica on total assets (ROA) = Total assets Return on parkland Equity. The ratio of net income after taxes to common justice measures the return earned on the common stockholder´s investment. Net profit after taxes Return on common equity (ROE) = ? Common equity 259 Lubica Lesáková Uses and Limitations of Profitability Ratio Analysis in Managerial Practice ROE is a measure of the efficiency with which the devoted emloys owner´s capital. It is an estimate of the earnings of invested equity... If you want to pick up a full essay, order it on our website: Orderessay

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