An investor wants to tests the financial position of Asian Paints Ltd. Thus, he wants to assess the short term liquidity as well as long term solvency. Discuss the four relevant ratio’s which he will definitely look into.
Answers
Answer:
Explanation: Investment may be defined as a commitiment of one's money in one or more of asset classes in anticipation of some gains while simultaneously bearing risk of uncertainity. To the economist , investment is the addition made to the nation capital stock that consist of goods and services that are used in the production process. A net asition to the capital stock means an increase in the buildings, equipment or inventories. These capitalstocks are used to produce other goods and services.Financial investment is the allocation of money to asset that are expected to yield some gain over a period of time. It is an exchange of financial claims such as stocks and bonds for money . They expected to gain returns and experience capital growth over the years.
Explanation:
To make the financial analysis, the investor to look into the financial statement of the company. When we talk about ratio analysis, then it is the process of determining and interpreting numerical relationship. The ratios that will be considered here include:
Quick Ratio- It analyses the companies ability to use its quick assets to pay off debts. It indicates companies short term liquidity.
Current Ratio- It is the ratio of current asset and current liabilities. It tests the credit strength and solvency of the company.
Debt equity ratio- It shows the proportion of equity and debt the company is using to finance its asset. It is the ratio of debt: equity.
Profitability ratio- It measures a company’s profitability and its performance.