Ratio Analysis

The cover story in the latest issue regarding Q3FY22 results of the various listed companies aptly summarised the winning and losing stocks.It was meticulous and highlighted the various operational aspects an investor should consider while analysing quarterly results. Can you brief regarding the basic ratios that must be analysed while studying a company either pre or post-declaration of results?

- Devyani Kulkarni

Editor Responds: Thank you for your kind words. We are glad you were impressed by the cover story published in the previous issue. Along with studying operational performance, it is also crucial to analyse a diverse array of ratios. Ratio analysis is a quantitative method of gaining insight into a company’s liquidity, operational efficiency and profitability by studying its financial statements such as the balance-sheet and income statement. Some of the important ratios that need to be analysed include current ratio, profit margin, debt to equity ratio, working capital ratio, dividend yield, PE ratio, PB ratio, earnings per share (EPS), RoCE and RoE. We hope we have answered your query. Keep writing to us.