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1. Apart from using ratios we should also use the disaggregated ratios to understand the companys situation e.g
understand the performance of a company in different business units help us understand if the compay’s
strategy is working for all aspects of the business and also pin point areas where it is not have a huge impact. For
newer companies we should focus on eth physical data pertaining to company’s operations e.g. per store sales,
sales per sqr. Mtr., customer transactions per store. Etc .
2. Asset Turnover: - Sales/Total Assets.
3. Book basis unamortized cost of an item for financial reporting
4. Book Income Financial statement income
5. Capital Leases: - A lease considered to have the economic characteristics of asset ownership. Lease considered
capital or purchased if the following criteria fulfilled.
6. Coverage ratio : - If the firm is generating enough cash to meet its interest expenses. Coverage ratio of 1 implies
that the firm is barely able to meet its interest obligations. .
Current performance into future as it reflects margins from core business activities of the firm.
7. Day’s receivable: - Trade receivebles/Average sales per day
8. Days Inventories: -Inventories/ Average cost of sales per day
9. Days Payable: - Trades Payable/ Average purchases per day or TP/Avg. cost of sales per day

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a. Deferred tax Asset: - We look at prepaid revenues received, Fin accounting accrue as we use it but
for tax accounting we record it as we receive the cash. We would end up paying more in the first
year. We also calculate the difference between the Taxes payable and Tax expenses. We have
already paid taxes in eth first year and that is greater than the taxes we will be paying in the later
years to come ( also less than the tax expense.) hence DTA
b. Deferred tax liability : - Taxes payable Taxes expense. We consider depreciation here in DTL
accounts. If Taxes payables( Tax reporting) > Tax Expenses (Fin accounting) then the Dr. Deferred TL
and vice versa.
10. Deferred taxes : - Income tax payable is not equal to income tax expense.
11. Dividend payout Cash dividends paid/net profit
12. EBITDA Margin = EBITDA/Sales. Doesn’t include Dep. and Amor, not actual measure of cash as some
expenses include non-cash items.
13. Inventories Turnover: - Cost of Sales / Inventories or Cost of materials /Inventories.
14. Net Non-current operating assets : - ( Total non-current operating assets - non-interest bearing non-current
liabilities)
15. Net Non-current operating assets turnover : - sales/ net non-current operating assets

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1. Apart from using ratios we should also use the disaggregated ratios to understand the companys situation e.g understand the performance of a company in different business units help us understand if the compay’s strategy is working for all aspects of the business and also pin point areas where it is not have a huge impact. For newer companies we should focus on eth physical data pertaining to company’s operations e.g. per store sales, sales per sqr. Mtr., customer transactions per store. Etc . 2. Asset Turnover: - Sales/Total Assets. 3. Book basis – unamortized cost of an item for financial reporting 4. Book Income – Financial statement income 5. Capital Leases: - A lease considered to have the economic characteristics of asset ownership. Lease considered capital or purchased if the following criteria fulfilled. 6. Coverage ratio : - If the firm is generating enough cash to meet its interest expenses. Coverage ratio of 1 implies that the firm is barely able to meet its interest obligations. . Current performance into future as it reflects margins from core business activities of the firm. 7. Day’s receivable: - Trade receivebles/Average sales per day 8. Days Inventories: -Inventories/ Average cost of sales per day – 9. Days Payable: - Trades Payable/ Average purchases per day or TP/Avg. cost of sales per day a. Deferred tax Asset: - We look at prepaid revenues received, Fin accounting accrue as we use it but for tax accounting we record it as we rec ...
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