Financial Performance Analysis in Tally
Financial Performance Key Ratio and Analysis
Various Accounting Reports & Financial statement show varieties of Reports with enormous amount of figures. Often, it is difficult to for top executives to go through all these reports and evaluate the operational efficiency and status of the financial health of the organization, from these bulky reports.
To get the intrinsic view about the health, liquidity or earning capability of an enterprise, financial analysts look for some key figures & ratios to quickly assess the health & performance of an enterprise.
Ratio Analysis Display in Tally
At Tally Main menu, or at Final Accounts Menu, select Ratio Analysis to get Ratio Analysis .
The Ratio Analysis is divided into 2 panes. Left pane displays figures of Principal Groups and right pane lists Principal Ratios, computed for the specified period.
Ratio Analysis Display in Tally
You may drill down through any figure to get related details. The meaning and computation of each of these figures are now explained.
Key Financial Account Groups positions in Tally
At the left part of Ratio Analysis screen , the figures of some Principal groups are shown.
- Working Capital : It is computed as [Current Assets -Current Liabilities]. Current Assets consists of the 6 Reserved Groups namely, Stock-in-Hand, Cash-in-Hand, Bank Accounts, Loans & Advances (Asset), Deposits (Asset) and Sundry Debtors while Current Liabilities consists of 3 Reserved Groups namely, Duties & Taxes, Provisions and Sundry Creditors.
Normally, Working Capital balance of a running concern has a positive figure. Low level of Working Capital may be indicator of insolvency while high level is indicator of insufficiency of liquid funds (or too much burden of Liabilities)
- Cash-in-Hand & Bank Accounts: It shows the total of all current bank accounts and cash accounts, showing the free cash available. This figure helps Cash management and payment decision.
- Bank OCC : It indicates Overdraft as on the period end Date.
- Sundry Debtors & Creditors : Reveals balance as on the date alongwith current dues. It helps Credit Management.
- Sales and Purchases :Shows the net value of Sales & Purchase, at a glance
- Stock-in-Hand: Reveals fund blocked in Stock Items
- Net Profit or Loss : Shows the overall results for the period.
- Working Capital Turnover : Indicates number of times Working Capital has been rolled over. It is arrived by dividing Sales with Working Capital (Current Assets-Current Liabilities). This is an indicator how good the working capital has been deployed into productive return. Higher figure indicates efficient utilisation of available resources.
- Inventory Turnover : Indicates number of times Stock has been rolled over. It is arrived by dividing Sales with Stock –in -hand. Higher figure indicates better management of Inventory.
Principal Financial Ratios in Tally
At the right part of Ratio Analysis screen, you get the Principal Ratios.
- Current Ratio : Computation Formula: Current Assets / Current Liabilities.
This ratio speaks about health of the organisation and measures the relative ability to pay Short-term debts.
- Quick Ratio : Computation Formula: [Current Assets -Stock] / Current Liabilities.
It is also termed as Acid Test Ratio. The Assets which can be quickly converted into liquid assets are considered for computation of this ratio and is considered a better tool to measure financial strength of an organisation from the liquidity perspective
- Debt/Equity Ratio : Computation Formula: Loans (Liability) / Net Capital Employed (Capital + Reserves)
This Ratio is the proportion of Long Term Debts to Net owned Capital (Capital + Reserves + Profit/Loss). This Ratio is indicator of Financial structure of the Company. Higher the Ratio, higher the risk of failure to repay Loan (Principal and Interest).
- Gross Profit % : Computation Formula: [Gross Profit / Net Sales] * 100
Expresses Gross Profit Margin which serves as an index of overall efficiency of main business of the organization.
- Net Profit % : Computation Formula: [Net Profit / Net Sales] * 100
Expresses Net Profit Margin which is an indicator of overall performance of the Organisation.
- Operating Cost % : Shows the component of expenses incurred on productive activities. Lower it is, higher the profitability. Computation Formula: 100- Net Profit Ratio
- Receivables Turnover in days : Computation Formula: [Sundry Debtors / Net Sales] * Number of Calendar Days
Some call it Collection Ratio also which is an indicator of average collection period of debts. Higher value calls for stringent control on Receivables.
- Return on Investment % : Computation Formula: Net Profit / Capital Employed (Capital + Reserves) * 100
An Important indicator for utilisation of resources to generate earnings.
- Return on Working Capital % :Computation Formula: [Net Profit / Working Capital] * 100
Indicates rate of return on the Working Capital (Current Assets – Current Liabilities) employed by the organization.
Thus Principal Group figures coupled with Ratio analysis throws light on the performance of the organisation to exercise proper control at appropriate time for better performance and return.
Performance Analysis figures are computed as per Reserved Accounts Groups. User created Primary Groups may not be considered for Performance Analysis.
Performance Analysis Display Configuration in Tally
At Ratio Analysis screen, click F12:Configure to get Ratio Analysis Configuration screen.
Ratio Analysis Configuration in Tally
Set the options as follows:
- Analysis Report Style : At Show Vertical Analysis :
- Set Yes to show Analysis Report in Vertical format
- Set No to show Analysis Report in Normal format
- Computation Formula : At Show Explanatory Lines :
- Set Yes to Show Computation Formula below each Ratio
- Set No. The Computation Formula will not be shown
Performance Analysis Display Buttons in Tally
At Ratio Analysis screen , you get the following buttons:
- F2:Period : Click F2:Period to set the period for Ratio Analysis Report.
- Columnar Buttons : Use the columnar buttons to create comparative columnar Reports for different Period / Companies.
Performance Analysis Display Button Bar in Tally
Ratio Analysis Statement Printing in Tally
At Ratio Analysis Display, click P:Print to get Ratio Analysis Printing screen. Type Y at Print ? Yes / No prompt to print the Report
Performance Analysis Report in Vertical Format
At Ratio Analysis Configuration screen, set Yes at Show Vertical Analysis to get Analysis Report in Vertical format. In vertical format, the Principal Groups are shown first, followed by Principal Ratios.
Performance Analysis in Vertical Format in Tally
Ratio Analysis Columnar Report in Tally
At Ratio Analysis screen, at the button bar click the respective buttons for Columnar Report, to get Columnar comparative reports for Multiple Period / Multiple Companies.
Ratio Analysis Columnar Statement in Tally
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