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Question for Everybody?
How to decide wht should be the numerator or denominator in Ratio analysis?
For Ex-Int coverage Ratio=EBIT/INTEREST AND if reverse it wht will happen?
2.Return on Assets-Pat+int/Total aSsets?
Thanks in advance
Replies (2)
Dear Sonia,
I couldn't get ur query..
Numerator or Denominator depends upon the Ratio which u r computing,i:e the analysis & it is not a choice...
Plz clarify ur query??
As i think you want to know the basic principle behind selection of Nem. and Den. in Ratio Analysis.
In ratios we compare one data with the other in relation or terms of any of the two data. In doing so we need to take any one date to be prime (in relation or Comparision of Which) other data are compared.This brings the need to set one as Nem. and another as Den.
Exap.. In Int coverage Ratio=EBIT/INTEREST this will show comparision based on earning and if reverse it will show comparision based on interest.
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