C. Dialogue ratio analysis

Russian: Are there any guidelines which enable the businessman to conduct his affairs efficiently and profitably and to compare his company's performance with those of other companies?

American: Yes, there are. One of the major tools is ratio analysis. Ratios make it easy to see trends, risks and to assess the results. All most important decisions are based on ratios.

R.: What are the most commonly used ratios?

Am.: We in the US operate with three main categories of ratios. We use ratios measuring solvency, efficiency, and profitability.

R.: Could you give some examples of each?

Am.: Yes, sure. Let's begin with measuring solvency.

R.: Solvency is the ability of a firm to meet its short-term liabilities as they come due, isn't it?

Am.: Yes, you are absolutely right. And one of the most commonly used measures of solvency is the current ratio.

R.: How is it found?

Am.: This is the ratio of all current assets, liquid assets, accounts receivable and inventories to current liabilities.

R.: When is a firm considered solvent on this measure?

Am.: If its current ratio is 2 to 1 or above. There is another ratio related to this one. It's the-debt-to-equity ratio. It is found by dividing total debt by the equity.

R.: I see. It's the indebtedness of a firm compared to its equity capital. But it's really more a measure of leverage than a measure of solvency.

Am.: Yes, you are right in a way. A highly leveraged company is one with a high proportion of bank loans to equity. But the ratio has some bearing on solvency, too. A low debt-to-equity ratio makes it easier for a firm to borrow to meet its short-term cash needs.

R.: That's clear. A ratio higher than 1 to 1 would make a firm a risky borrower. And what ratios help to measure a firm's efficiency?

Am.: One such ratio is that of sales to inventory, called the inventory turnover ratio.

R.: We say that stock or inventory has "turned over" when it has been sold and replaced with new stock. If we want to double our profit one way is to double the rate of stock turnover.

Am.: Yes, and this ratio varies widely from one industry to another. We can't say whether the ratio is good or poor until we know the product we are discussing. And now let's turn to measuring profitability.

R.: It's the figure that really matters in the end to any businessman, isn't it?

Am.: Yes, practically there are two measures that compare profit to the capital invested in a firm. One such measure is return on equity and the other is return on assets. Both are very important for investors.

R.: No doubt. Knowing the payback of an investment is important because the earlier the payback, the quicker the money can be reinvested, and also the less the risk investors are exposed to.

Am.: You are right, the ratios show how the capital "works". Investors' decisions totally depend on the ratios.

B. financial ratios финансовые коэффициенты/показатели

price/earnings ratio отношение рыночной цены (акции) к чистой прибыли компании (в расчете на одну акцию)

gearing ratio (debt-to-equity ratio) отношение задолженности к собственному капиталу

indication n показатель

analyst n экономист-аналитик

liquidity ratio коэффициент ликвидности

financial leverage ratios доля заемных средств в совокупном капитале

C. ratio analysis кредитный и инвестиционный анализ

solvency n платежеспособность

efficiency n эффективность

profitability n доходность, рентабельность

current ratio отношение оборотного капитала к краткосрочным обязательствам

debt-to-equity ratio соотношение собственных и заемных средств

indebtedness n задолженность

inventory turnover ratio оборачиваемость товарных запасов

to turn over оборачиваться

return on equity доход от акций, доход на собственный (акционерный) капитал

return on assets доход от имущества

payback of an investment окупаемость инвестиций

Words you may need:

financial accounting финансовый учет

cost accounting производственный учет

file v представлять какой-л. документ

cumulative adj совокупный

Words you may need:

takeover n слияние компаний

expedite v ускорять

pace n темп(ы)

from scratch с нуля

Words you may need:

debenture capital заемный капитал

preference shares привилегированные акции

ordinary shares обычные акции

deferred shares отсроченные акции

voting right право голоса

rights issue выпуск льготных акций, предлагаемых акционерам компании

bonus/scrip/capitalisation issue бонусная эмиссия, выпуск льготных акций (или бесплатных акций)

Words you may need:

discounted cash flow будущие поступления наличными, приведенные в оценке настоящего времени

optimization technique метод оптимизации

Words you may need:

to be versed (in) разбираться (в чём-л.)

outlets n pl (зд.) возможности

rationale n основная причина, логическое обоснование

marginal analysis анализ по предельным показателям

marginal revenue предельный доход

marginal costs предельные издержки