Fundamentals of Financial Management, Third Edition

19.3 APPLICATION OF RATIOS

19.3.1 Financial Statements

Since the computation of various ratios involves two types of corporate financial statements — the income statement and the balance sheet—they are shown hereunder, on the basis of which these ratios will be computed.

 

Table 19.1 Income Statement of ABC Co. for the year Ending, 31 December, 2003

	Amount (Rs)	Amount (Rs)
Net sales		27,00,000
Less: Cost of goods sold		22,00,000
Gross margin		5,00,000
Less: Administrative expenses	1,50,000
Selling expenses	1,15,000
Lease payments	10,000	2,75,000
Operating Income (EBIT)		2,25,000
Add: Revenues on account of interest and royalty		1,500
Operating Income ...