Selection Ratio

Examples of Selection Ratio in the following topics:

• Employee Selection

  • However, it most commonly refers to the selection of workers.
  • A selection system should depend on job analysis.
  • Two major factors determining the quality of a newly hired employee are predictor validity and selection ratio.
  • The selection ratio (SR) is the number of job openings (n) divided by the number of job applicants (N).
  • Break down the human resource selection process as organizations pursue new employee talent

• Selected Financial Ratios and Analyses

  • A publicly traded company's stock price can also be a variable used in the computation of certain ratios, such as the price/earnings ratio.
  • The following are some examples of financial ratios that are used to analyze a company.
  • This ratio indicates the proportion of income that has been realized in cash.
  • As with quality of sales, high levels for this ratio are desirable.
  • Capital Acquisition Ratio = (cash flow from operations - dividends) / cash paid for acquisitions.

• Classification

  • Ratio analysis consists of calculating financial performance using five basic types of ratios: profitability, liquidity, activity, debt, and market.
  • A financial ratio, or accounting ratio, is derived from a company's financial statements and is a calculation showing the relative magnitude of selected numerical values taken from those financial statements.
  • Activity ratios, also called efficiency ratios, measure the effectiveness of a firm's use of resources, or assets.
  • Market ratios are concerned with shareholder audiences.
  • Classify a financial ratio based on what it measures in a company

• Ratio Analysis and EPS

  • A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise's financial statements.
  • Acid-test ratio (Quick ratio): (Current assets - Inventory - Prepayments) / Current liabilities
  • Times interest earned ratio (Interest Coverage Ratio): EBIT / Annual interest expense
  • Return on assets (ROA ratio or Du Pont Ratio): Net income / Average total assets
  • Ratio analysis includes profitability ratios, activity (efficiency) ratios, debt ratios, liquidity ratios and market (value) ratios

• Industry Comparisons

  • However, while ratios can be quite helpful in comparing companies within an industry and even across some similar industries, comparing ratios of companies across different industries may not be helpful and should be done with caution .
  • However, in terms of ratio analysis and comparing companies, it is most helpful to consider whether the companies being compared are comparable in the financial metrics being evaluated in the ratios.
  • Different businesses will have different ratios for different reasons.
  • A peer group is a set of companies or assets which are selected as being sufficiently comparable to the company or assets being valued (usually by virtue of being in the same industry or by having similar characteristics in terms of earnings growth and return on investment).
  • The price to earnings ratio, for example, is a common multiple but can differ across companies that have different capital structures; this could make it difficult to compare this particular ratio across industries.

• Price/Earnings Ratio

  • The P/E ratio is a widely used valuation multiple used as a guide to the relative values of companies; a higher P/E ratio means that investors are paying more for each unit of current net income, so the stock is more "expensive" than one with a lower P/E ratio.
  • The P/E ratio can be regarded as being expressed in years.
  • P/E ratio = Market price per share / Annual earnings per share
  • Estimates are typically derived as the mean of those published by a select group of analysts (selection criteria are rarely cited).
  • The P/E ratio of a company is a significant focus for management in many companies and industries.

• Interpreting Ratios and Other Sources of Company Information

  • There are four methods for making these types of comparisons: vertical analysis, horizontal analysis, ratios, and trend percentages.
  • The trend percentages method is the same as horizontal analysis, except that in the former, comparisons are made to a selected base year or period.
  • Ratios are expressions of logical relationships between items in financial statements from a single period.
  • It is possible to calculate a number of ratios from the same set of financial statements.
  • The only limiting factor in choosing ratios is that the items used to construct a ratio must have a logical relationship to one another.

• Market Reporting

  • It is computed from the prices of selected stocks (sometimes a weighted average).
  • With this information, along with a company's consolidated financial statements, the following ratios and calculations can be performed:
  • Dividend yield on common stock ratio=Dividend per share of common stock
  • Payout ratio on common stock = Dividend per share of common stock
  • By comparing the above ratios with those of other companies, investors, accountants, and forecasters can determine the position and health of their respective company's stock.

• Total Debt to Total Assets

  • The debt ratio is expressed as Total debt / Total assets.
  • Financial ratios are categorized according to the financial aspect of the business which the ratio measures.
  • Debt ratios measure the firm's ability to repay long-term debt.
  • The higher the ratio, the greater risk will be associated with the firm's operation.
  • Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms.

• How Trigonometric Functions Work

  • When solving for a missing side, the first step is to identify what sides and what angle are given, and then select the appropriate function to use to solve the problem.
  • The ratio of the sides would be the opposite side and the hypotenuse.  
  • The ratio that relates those two sides is the sine function.
  • The ratio of the sides would be the adjacent side and the hypotenuse.  
  • The ratio that relates these two sides is the cosine function.