Ratio Analysis Report

Ratio analysis is a powerful tool for financial analysis. A meaningful analysis of a financial statement is made possible by the use of ratios.

Ratios are a set of figures compared with another set. The comparison gives an understanding of the financial position of a business unit. There are a number of ratios which can be computed from a single set of financial statements. The ratios to be computed depend on the purpose for which these ratios are required. A single ratio may sometimes give some information, but to make a comprehensive analysis, a set of inter-related ratios are required to be analysed.

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Principal Groups and key figures

Payment Performance of Sundry Debtors

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The Ratio Analysis Report is divided into two parts, Principal Groups and Principal Ratios. The Principal Groups are the key figures that give perspective to the ratios. Principal Ratios relate two pieces of financial data to obtain a comparison that is meaningful. You can view this report in browser .

Go to Gateway of Tally > Ratio Analysis . The Ratio Analysis screen is displayed as shown below:

Principal Groups and key figures

The principal groups and key figures in Tally.ERP 9 are detailed in this topic.

Working Capital : The Net Working Capital is calculated by subtracting Current Liabilities from Current Assets. Financial Analysts often consider the total Current Assets as the Working Capital. This serves as a measure of how far the firm is protected from liquidity problems.

Cash in Hand and Bank Balances : This data presents another perspective on the liquidity position.

Sundry Debtors (due till today) : The list of all the debtors and the total debts due as on the date of the statement, are displayed.

Sundry Creditors (due till today) : The list of all the creditors and the total credits due as on the date of the statement are displayed.

Sales and Purchase Accounts : The Sales and Purchase Accounts, which collate the trading activity for the period, are displayed.

Stock in Hand : This field displays the stock in hand as on the date of the report and together with Cash and Bank Balances and Debtors, completes the Current Assets aspect of the Working Capital.

Nett Profit : This is derived from the Profit & Loss Account and is the profit after direct and indirect expenses.

Wkg. Capital Turnover (Sales Accounts/Working Capital) : This is an activity or efficiency ratio that shows the number of times the working capital has been rolled over during a particular period. It depicts how effectively the firm is using its working capital.

Inventory Turnover (Sales Accounts/Closing Stock) : This is an activity or efficiency ratio that shows the number of times the stock has been rolled over during the period of the report. It depicts how effectively the firm is using its inventories.

Payment Performance of Sundry Debtors

Payment Performance of Debtors (Receivable Turnover in days) is the average time the customers take to actually pay their bills irrespective of the outstanding balance on the statement date. It is quite possible that the receivable turnover is low and the payment performance is high, indicating that the customers cleared their outstanding, but took a long time doing it.

To get group level and customer level performance reports and a detailed position of debt collection, you have to drill down from the ratios. Use a customer statement that shows both the receivable turnover in days and the customer's actual payment performance.

1. Go to Gateway of Tally > Ratio Analysis .

2. Drill down from Recv. Turnover in days .

3. Select a party ledger and press Enter to drill down. The Ledger Payment Performance screen is displayed as shown:

The Ledger Payment Performance statement displays the receivable turnover in days. This is the balance outstanding in relation to the total sales made multiplied by the total number of days in the period. This ratio should be used in combination with the Average Performance of actual payments and the payment history of the customer to assess how long he might take to pay the outstanding balance.

The Actual payment history is given in the table for each invoice that was paid by the customer. It shows when the invoice was paid, how long it was due and what was the delay in payment. The customer's average performance is shown at the bottom of the screen.