Here’s an outline for a Ratio Analysis Report for business finance:
1. Title Page
Title of the Report (e.g., "Ratio Analysis of ABC Corp. for Fiscal Year 2024")
Your Name
Course/Program Name
Date
2. Executive Summary
A concise overview of the key findings from the ratio analysis.
Highlight the most critical financial insights (e.g., liquidity, profitability, or
solvency issues).
Summarize any recommendations based on the analysis.
3. Introduction
Purpose of the Report:
o Explain the objective of the ratio analysis (e.g., assessing financial
health, comparing with industry benchmarks, identifying trends).
Company Overview:
o Briefly describe the company being analyzed (industry, size, market
position).
Scope of the Analysis:
o Mention which financial ratios will be analyzed (e.g., liquidity,
profitability, efficiency, solvency, and market ratios).
4. Methodology
Source of Data:
o Indicate where the financial data is sourced from (e.g., annual financial
statements, quarterly reports, etc.).
Time Period Analyzed:
o Specify the period under review (e.g., fiscal years 2022-2024).
Types of Ratios Used:
o List and briefly describe the financial ratios used in the analysis
(liquidity ratios, profitability ratios, solvency ratios, etc.).
5. Ratio Analysis
Liquidity Ratios:
o Current Ratio: Measures the company's ability to meet short-term
obligations.
o Quick Ratio: Assesses liquidity without relying on inventory.
o Cash Ratio: Evaluates cash and cash equivalents relative to current
liabilities.
o Analysis: What do these ratios reveal about the company’s short-term
financial health?
Profitability Ratios:
o Gross Profit Margin: Measures the proportion of revenue remaining
after the cost of goods sold.
o Net Profit Margin: Indicates the profitability of the company after all
expenses.
o Return on Assets (ROA): Shows how effectively the company uses
its assets to generate profit.
o Return on Equity (ROE): Measures profitability relative to
shareholder equity.
o Analysis: What do these ratios tell about the company’s ability to
generate profit?
Solvency Ratios:
o Debt-to-Equity Ratio: Indicates the proportion of debt used in
financing compared to equity.
o Interest Coverage Ratio: Measures the ability to pay interest on
debt with operating income.
o Equity Ratio: Shows the proportion of a company’s assets that are
financed by equity.
o Analysis: What do these ratios reveal about the company’s long-term
financial stability?
Efficiency Ratios:
o Asset Turnover Ratio: Measures how efficiently the company uses its
assets to generate revenue.
o Inventory Turnover Ratio: Evaluates how often inventory is sold and
replaced over a period.
o Receivables Turnover Ratio: Assesses how efficiently the company
collects its receivables.
o Analysis: What insights do these ratios provide on operational
efficiency?
Market Ratios:
o Price-to-Earnings (P/E) Ratio: Indicates how much investors are
willing to pay for a company’s earnings.
o Earnings per Share (EPS): Measures the profitability of the company
on a per-share basis.
o Dividend Yield: Shows the return on investment based on dividends
paid.
o Analysis: What do these ratios suggest about the company's market
performance and investor sentiment?
6. Interpretation of Results
Comparison with Industry Benchmarks:
o Compare the calculated ratios with industry averages or key
competitors.
o Analyze any significant deviations or trends (e.g., above-average
profitability, below-average liquidity).
Trend Analysis:
o Assess the changes in the ratios over multiple periods (e.g., 3 to 5
years).
o Discuss any noticeable improvements or declines in the company’s
financial health.
Strengths and Weaknesses:
o Summarize the company’s strengths based on the ratio analysis (e.g.,
strong profitability, low debt levels).
o Discuss areas for improvement (e.g., liquidity concerns, inefficiency in
asset utilization).
7. Recommendations
Improvement Areas:
o Provide actionable suggestions for improving financial performance
(e.g., reducing debt, improving inventory turnover).
Strategic Decisions:
o Recommend strategies to address identified weaknesses, such as
increasing liquidity, enhancing operational efficiency, or adjusting
capital structure.
Long-term Financial Goals:
o Suggest financial goals for the company (e.g., achieving a specific
ROE, improving cash flow management).
8. Conclusion
Summarize the main findings from the ratio analysis.
Reaffirm key insights about the company’s financial health and performance.
Highlight the overall implications for the company’s future financial strategy.
9. References
List all the sources of data used (e.g., financial statements, books, research
articles, online resources).
10. Appendices (Optional)
Include additional data, charts, graphs, or tables that support the analysis.
Present detailed calculations of each ratio.
