Question

If I have year end information for 2016 and 2015 and they want to know the...

If I have year end information for 2016 and 2015 and they want to know the ratios of the fiscal year 2016. What years numbers do I use for calculations? Averages will be from both years I 100% understand that. The ratios that do not require averages what year would I use 2015 OR 2016.

Homework Answers

Answer #1

If the Denominator, as well as Numerator, are both from the balance sheet or the income statement only then use the 2016 numbers for calculating ratios for the fiscal year 2016
For eg
1) Net Profit Margin (2016) = Net Profit (2016) / Sales (2016) (numerator as well denominator are from income statement)
2) Current Ratio (2016) = Current Assets (2016) / Current Liabilities (2016) (numerator as well denominator are from balance sheet)

If the numerator is from the income statement and the denominator is from the balance sheet or income statement then take the average of the denominator for years 2015 and 2016
For eg
1) Accounts Receivables Turnover (2016) = Sales (2016) / [(Accounts Receivables of 2015 + Accounts Receivables of 2016)/2] (sales is from Inc Statement whereas accounts recievables is from balance sheet)

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