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g. Net Income to Total Liabilities NITL
This ratio shows the net profit portion to the total liabilities. Higher the ratio is, higher the net profit that get from company total
liabilities. NITL =
× 100
h. Net Income to Net Worth NINW
The ratio shows the net income portion to the net worth. Higher the ratio is, the expectation of owner to get profit also higher.
NINW = × 100
i. Net Worth to Total Liabilities NWTL
This ratio shows the portion of company owner importance to total liabilities of third parties. Higher the ratio is, the portion of net
worth could be higher. NWTL =
× 100
Financial ratios have some usefulness in predicting the company situation. Which are:
a. Comparison Performance
Financial ratio can be used as in two different but equally useful ways. You can use them to examine the current
performance of your company in comparison to pass period of
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time, from the prior quarter to years ago. Frequently, this can help you to identify problems that need fixing. Even better, it
can direct your attention to potential problems that can be avoided. In addition, you can use these ratios to compare the
performance of your company against that of your competitors or other members of your industries ziosbank 1999:5.
b. Risk and Return Investment
As financial ratios are used extensively in the corporate financial reports, it is now a common understanding that if
corporate financial reporting is to be adequately supportive of investment decision making, then clearly it must provide
information useful to the information of risk and return investment farelly, et al.,1985 taken from Richard P. Kleeburg
2005:25.
In Richard P. Kleeburg 2005:12 there is a statement from Ritter 1991, and Loughran and Ritter 1995said that
firms conducting initial and seasoned equity offerings have historically experienced relatively low long-run equity returns.
Additionally, these returns covary with firm characteristics such as size and book-to-market Brav and Gompers 1997 and
Brav, Geczy, and Gompers 2000. Two explanations for these