Financial ratio analysis is a crucial way to measure and compare company performance, this method uses ratio users to compare financial values in a certain period, providing knowledge about the strength and friendliness of a business, in this discussion we will discuss about financial ratio analysis, including differences in static and dynamic ratios as well as how to apply it
Difference between static and dynamic Keugnan ratio
Static financial ratios or what is often called vertical analysis is one way used to see the financial performance of the company at a certain time, this method uses a comparison of postal items in financial statements such as reading profit and loss with relevant categories in the same period its goal is to understand the propesi of each post to the total, so,
Static Ratio Components
Liquidity ratios see the company’s ability to pay to complete each transaction in which there is a current ratio, cash ratio
Solvency ratio debt to equity ratio, interest coverage ratio
Profitablitas ratio in which purplish view of the company in the form of kotr profit margin, asset profit
The advantage of this ratio because it sees the consideration kejajarasn between pos keunagnan keuuangna one with another at one time only then the report of this ratio is easy to understand, makes it easy to compare between perusaaahan at one time tertentut
Losses due to the wide scope of narrow research in one time only then this ratio can not calculate the terne or changes in company performance, very vulnerable terhadpa influence of extraordinary factors that biasnay temporary
Static financial ratios or often known as horizontal analysis model is one way used to see the financial performance of the company by comparing data from several periods, this method allows the identification of upward or downward trends in financial aspects over time,
Components of static financial ratios include
The ratio of sales growth in it contains data on Salers over time
Profit growth ratio is the data that contains penignkatan ketutungan company
Inventory turnover ratio one form of inventory turnover whether mengelami increase or penuruanan for the next data the above data compared right to be compared which is useful for making decisions in the future
The advantages of this model provide a more complete picture of the company’s performance, making it easier for companies to see trends and also changes to make it easier for future company performance
Weaknesses are more complicated because a lot of data is used, one period of different data will affect the strategy of decision makers in the future
Among the many advantages of financial ratio analysis, keunagn analysis also has several obstacles including
reliance on accurate financial information if there is one or more keslaah in one data keunagn will affect the decision pengmbilan misleading
Less sensitive to qualitative factors such as reputation, innovation or customer loyalty are not included in the financial statements so the involvement of all parties is necessary to be able to read the company well
Comparison is not always valid keunangan report only compares langasung between one company and another company dalma the same industry and has a similar size sehinggan comparison is not always valid
Using financial ratio analysis makes it easy for us to assess the performance of the company, among others, by identifying areas of strength and weakness of the company as a parable low liquidity ratio shows the potential problems in fulfilling short-term debt, evaluating trends and changes in performance using Dynamic models will help to understand whether the company’s performance is improving or Competitive Enterprise
Financial ratio analysis is a useful tool that helps management also invest to find out the financial condition of the company by selecting the appropriate ratio, comparing several counters connecting qualitative analysis will help us make good decisions for the future of the company