Ratio Analysis

The following selection of ratios can be used to evaluate the financial performance and status of companies from their published financial reports. The figures included will be from the Smiths Industries' published financial statements for 1993

Cash Flow

Balance Sheet

Profit and Loss

The Ratios marked (1) to (6) are perhaps the most useful.

Financial Gearing

Here we wish to compare the amount of fixed interest bearing capital (interest bearing loans), with the shareholders' funds that do not have to receive dividend payments in difficult years. As preference shares normally receive a fixed dividend in preference to ordinary shareholders, they are normally treated as loans - where our interest is in the resulting volatility in returns to ordinary shareholders.