Conduct a thorough ratio analysis for Fincare small finance bank

Ratio Analysis for Fincare Small Finance Bank

Ratio Analysis is a quantitative method of analyzing financial statements of a business. It involves analyzing the financial information of a company, such as the balance sheet, income statement, and cash flow statement, to assess its performance and financial health. By calculating various ratios, such as liquidity ratios, activity ratios, solvency ratios, and profitability ratios, investors can gain an understanding of the company’s financial situation, such as its ability to pay its debts, generate cash flow, and generate profits.

Liquidity Ratios

Liquidity ratios measure a company’s ability to pay its short-term debts. It is important for a company to have sufficient liquidity to pay its short-term obligations. The two most common liquidity ratios are the current ratio and quick ratio. The current ratio measures a company’s ability to pay its current liabilities, which are obligations due within one year. The quick ratio measures a company’s ability to pay its short-term obligations without relying on its inventory. The higher the current ratio and the quick ratio, the better the company’s liquidity.

Activity Ratios

Activity ratios measure a company’s ability to manage its assets and liabilities. The two most common activity ratios are the inventory turnover ratio and the accounts receivable turnover ratio. The inventory turnover ratio measures how quickly a company is able to sell its inventory. The accounts receivable turnover ratio measures how quickly a company is able to collect payments from its customers. The higher the inventory turnover ratio and the accounts receivable turnover ratio, the better the company’s ability to manage its assets and liabilities.

Solvency Ratios

Solvency ratios measure a company’s ability to repay its long-term debt. The two most common solvency ratios are the debt-to-equity ratio and the debt-to-assets ratio. The debt-to-equity ratio measures the amount of debt relative to the amount of equity. The debt-to-assets ratio measures the amount of debt relative to the amount of assets. The lower the debt-to-equity ratio and the debt-to-assets ratio, the better the company’s ability to repay its debt.

Profitability Ratios

Profitability ratios measure a company’s ability to generate profits. The two most common profitability ratios are the return on assets and the return on equity. The return on assets measures the amount of profit generated relative to the amount of assets. The return on equity measures the amount of profit generated relative to the amount of equity. The higher the return on assets and the return on equity, the better the company’s ability to generate profits.