It is the study of the significance of financial ratios for a company.

Ratio analysis
is very important in fundamental analysis, which investigates the financial health
of companies. An example of ratio analysis is the comparison of price-earnings
ratios of different companies. This helps analysts determine which companies'
share prices properly reflect their performances and therefore what investments are
most likely to be the most profitable.
For a particular organization, it is the study of the importance of fanancial ratios.
It is the one of the fundamental analysis used to study the importance of fanancial
ratios which determines the financial strength of a particular organization. For
instance

Profitability
These ratios focus specifically on the profits of the firm (both gross and net profits). The profits are
compared with sales, capital to provide some standard for comparison. These ratios in this group are
as follows:

Return on capital employed

Gross profit margin (gross profit in relation to sales)

Net profit margin (net profit in relation to sales)

For most firms, achieving profits are the main goal of the organisation. In limited companies this is
even more likely to be the case. This is because the company is owned by shareholders who, expect
possibly in the case of private limited companies, have purchased shares with the aim of maximising
their returns. The profitability ratios will analyse accounts from the perspective of the size of the
profits, and then compare these profits to other figures.

Return on Capital Employed Ratio (ROCE)

RETURN ON CAPITAL EMPLOYED (ROCE) :
Return on capital employed is used in finances as a measure of returns that a company is realizing from
its capital employed .Return on Capital Employed issued to prove the value the business gains from its
assets and liabilities. it is a measuring tool that measures the efficiency and profitability of capital
investments undertaken by a corporation.

Previous Year (3848159/7844070) X 100 = 49.05 %

Current Year (1634090/9175205) X 100 = 17.80 %

Return on capital employed (ROCE) has fallen down 31.25% points in 2013. The drop was due to a
significant decline in adjusted EBIT. The increase in capital employed, which equates to the assets
deemed necessary for business and subject to the cost of capital as derived from the balance sheet, also
contributed to the drop in ROCE. The rise in capital employed is due primarily to a decline in other
provisions and an increase in receivables and other assets

GROSS PROFIT MARGIN

Gross profit margin is a common ratio in financial statement analysis. Management can use gross profit
margin internally as an aspect of their pricing structure or externally to compare their company to similar
companies. Similarly, investors can use gross profit margin as a means of comparing two companies.The
gross profit margin is a measure to show how much of each sales dollar a company keeps after factoring
in cost of goods sold

Previous Year (4519882/13539149) X 100 = 33.38 percent

Current Year (5182617/13057693) X 100 =

39.69 percent

The Gross Profit has increased by 6.31 percent. The possible reason
may be increased in selling price of products with inelastic demand.

NET PROFIT MARGIN

Net profit margin is the percentage by which a company's total sales or revenue exceeds or is less than
the sum of its expenses. If a company has a positive net profit margin during a certain period of time, it
means the company made more money during that period than it spent whereas a negative net profit
margin means the company spent more money than it made.

Previous Year (3848159/13539149) X 100 = 28.42 percent

Current Year (1634090/13057693) X 100 = 12.51 percent

The Profit Margin has decreased by 15.91. It could be due to

excess stock that is left unsold.