The following points highlight the six main analysis made while making financial statement analysis.
1. Liquidity or Short-Term Solvency Analysis (Or Ratios):
Liquidity or short-term solvency analysis aims to determine the ability of a business to meet its financial obligations during the short-term and to maintain its short-term debt-paying ability. The aim of liquidity analysis is for a company to have adequate funds on hand to pay bills when they are due and to meet unexpected needs for cash.
If a business enterprise cannot maintain its short-term debt paying ability, obviously it cannot maintain a long-term debt-paying ability or long-term solvency. Shareholders also will not be satisfied with such a state of affairs of the company. Even a business enterprise on a very profitable course will find itself bankrupt if it fails to meet its obligations to short-term creditors.
Liquidity analysis mainly focuses on balance sheet relationships that indicate the ability of a business to liquidate current and non-current liabilities. The ratios that evaluate liquidity relate to working capital or some part of it, because it is out of working capital that debts are paid as they mature.
The comparisons and ratios related to evaluating liquidity or short-term solvency are as follows:
(i) Working Capital Position:
The working capital of a business is the excess of current assets over current liabilities; this is computed by subtracting current liabilities from the current assets. The resulting working capital figure is taken as one of the primary indications of the short-term solvency of the business.
The working capital formula is as follows:
Working Capital = Current assets/Current liabilities
The current working capital amount should be compared with past amounts to determine if working capital is reasonable. Caution must be exercised, because the relative size of the firm may be expanding or contracting. Further, the absolute amounts of working capital are difficult to use in comparing companies of different sizes or in comparing such amounts with industry figures.
(ii) Current Ratio:
Current ratio is sometimes referred to as working capital ratio or banker’s ratio. Current ratio expresses the relationship of current assets to current liabilities. It is widely used as a broad indicator of a company’s liquidity and short-term debt-paying ability.
The current ratio formula is as follows:
Current ratio = Current assets/Current liabilities
Current ratio is a more dependable indicator of solvency than is working capital. For many years, the guideline for the minimum current ratio has been 2:1. The assumption is even if the value of current assets declines by 50%, the firm can still pay its current liabilities. But now-a- days there has been a decline in the liquidity of many firms.
It can be said that in some industries, a current ratio substantially below 2 is adequate, while some other industries may require a ratio much larger than 2. In general, the shorter the operating cycle, the lower the normal current ratio. The longer the operating cycle, the higher the normal current ratio. A higher current ratio enables a firm to pay off current obligations and provides adequate margin of safety to the creditors.
A company’s current ratio can be compared with the company’s past current ratios and with industry averages as well. Such comparisons can help in determining if the current ratio is high or low, at this period of time.
However, these comparisons do not indicate why the current ratio is high or low. Possible reasons for unsatisfactory current ratio can be found from an analysis of the individual accounts and items which make up the current assets and current liability.
The following are the current assets and current liabilities in respect of two companies, Company A and Company B:
The current ratio will be as follows:
(iii) Acid Test Ratio or Quick Ratio:
The current ratio is generally used to evaluate an enterprise’s overall short-term solvency or liquidity position. The current ratio does not take into account the makeup or composition of current assets. For example, a rupee of cash or debtor is considered more readily available to meet obligations than a rupee of inventory.
The quick ratio is designed to overcome this problem by relating the most liquid assets to current liabilities. Cash, marketable securities or short-term investments, receivables and prepaid are included within the meaning of most liquid assets; inventory is excluded.
The acid test ratio is as follows:
Acid Test = Current Assets – Inventory/Current Liabilities
It may be preferable to have a better view of liquidity by excluding some other items in current assets that may not represent relatively current cash flow. Examples of items to be excluded are prepaid and miscellaneous items such as assets held for sale.
This is considered a more conservative manner of computing the acid test ratio and the formula of acid test ratio in this situation will be as follows:
Acid Test = Cash + Marketable Securities + Net Receivables and Debtors/Current Liabilities
Inventory should be removed from current assets when computing the acid test ratio. Some of the reasons for this are that inventory may be slow moving or possibly obsolete and parts of the inventory may have been pledged to specific creditors. For example, a winery has inventory that requires considerable time for aging and therefore a considerable time before sale.
To include the wine inventory in the test computation would overstate the liquidity. There is also a valuation problem with inventory, because it is stated at a cost figure that is likely to be materially different from a fair current valuation. In summary, inventory should be left out of the computation because of possible misleading liquidity indications.
The usual guideline for the acid test ratio is 1.00. However, some industries may find that a ratio less than 1.00 is adequate, while others need a ratio greater than 1.00. For example, a typical grocery store sells only for cash and therefore does not have receivables. This type of business can have an acid test substantially below the 1.00 guideline and still have adequate liquidity.
A firm has the following current assets and current liabilities:
(iv) Cash Ratio:
Liquidity of a firm can be viewed from an extremely conservative point of view and the short- term liquidity of a company may be measured through cash ratio. The cash ratio relates cash and marketable securities to current liabilities.
The cash ratio is computed as follows:
Cash Ratio = Cash + Marketable Securities/Current liabilities
Cash ratio is not given much importance unless a firm is in deep financial trouble. It is not considered pragmatic to expect a business enterprise to have enough cash and marketable securities to cover current liabilities.
However, in the case of very slow-moving inventories and receivables and highly speculative companies, cash ratio is of great importance. A high cash ratio indicates that a business enterprise is not using its resource cash to best advantage. A low cash ratio reflects an immediate problem with paying bills.
2. Analysis for Measuring the Movement of Assets- Activity Ratios:
Activity ratios, also known as turnover ratios, indicate the efficiency with which an enterprise’s resources are utilized. Liquidity or short-term analysis (current ratio and acid test ratio) will show misleading if debtors are too high because of slow collections. Similarly, the current ratio will be misleading if inventory is not sold and thus remains at high levels.
Since liquidity ratios (i.e., current ratios and acid test ratio) ignore the movement of current assets, it is necessary for short term creditors to make an analysis of how fast the debtors and stock are turned into cash so that their claims can be met timely.
Moreover, the overall profitability of the business depends upon:
(1) The rate of return of capital employed; and
(2) The turnover, i.e., the speed at which the capital employed in the business rotates.
Hence, in order to find out which part of capital (i.e., assets) is efficiently employed and which part not, different activity or turnover ratios are calculated.
Mainly activity ratios include:
(i) Capital turnover ratio
(ii) Asset turnover ratio
(iii) Net working capital turnover ratio
(iv) Inventory turnover ratio
(v) Debtor’s turnover ratio or Receivables turnover.
(i) Capital Turnover Ratio:
This ratio measures the effectiveness with which a firm uses its financial resources. It indicates the number of times the capital has been rotated in the process of doing business.
The ratio is computed as follows:
Net Sales (or cost of goods sold)/Capital employed or owners’ equity
Net Sales = Total Sales less returns (if any)
Cost of goods sold = Opening Stock + Purchases + Direct Expenses – Closing Stock
Sales – Gross profit
A firm has opening and closing stock of Rs. 30,000 and Rs. 20,000 respectively. Its administrative and selling expenses are Rs. 10,000; Purchase Rs. 3,10,000; Sales Rs. 5,00,000; Debentures Rs. 50,000 (representing one-third of owner’s equity).
The capital turnover ratio is as follows:
(ii) Asset Turnover Ratio:
This ratio reveals the number of times the net tangible assets (i.e., total assets less current liabilities less intangibles) are turned over during the year. Strictly speaking, average net tangible assets should be used in calculating this ratio. But, invariably net tangible assets at the end of the year is used.
Asset Turnover = Turnover/Net Tangible Assets
An improvement in asset turnover ratio as compared to the previous year indicates that the turnover of the company has improved. In cases where assets are not revalued or replaced, its magnitude will be decreasing over the years due to depreciation. Then obviously, the ratio will be higher as the turnover figures for the future will reflect an increasing trend.
Another form of assets turnover ratio can be computed as fixed assets turnover ratio. This ratio indicates the extent to which the investments in fixed assets have contributed to sales. If compared with a previous period, it indicates whether investment in fixed assets has been judicious or not.
The higher this ratio, better it is because it indicates higher efficiently displaying that investments in fixed assets has resulted in higher sales. A lower ratio may point to the under utilisation or non-utilisation of certain assets.
The ratio is calculated as follows:
Net sales/Fixed assets less depreciation
The following details have been given for Messors ABC Ltd. for two years. You are required to find out Fixed Assets Turnover Ratio and comment on it:
There has been decline in the Fixed Assets Turnover Ratio though absolute figures of sales have gone up. It indicates that increase in the investment in Fixed Asset has not brought about proportionate gain. However, before concluding, results for next two to three years must also be seen.
(iii) Net Working Capital Turnover Ratio:
This ratio indicates whether or not working capital has been effectively utilised in making sales. This ratio is computed by dividing the net sales or cost of goods sold by net working capital. Net working capital signifies the excess of current assets over current liabilities.
The ratio is calculated as follows:
Net Sales/Net Working Capital
A high net working capital ratio (if it is expressed in percentage) indicates efficient use of working capital and quick turnover of current assets like stock and debtors. A low ratio indicates low turnover of these assets.
(iv) Inventory Turnover Ratio:
Inventory turnover measures the relative size of inventory and influences the amount of cash available to pay liabilities. A smaller, faster-moving inventory means that the company has less cash tied up in inventory.
On the contrary, a build-up in inventory means that a recession or some other factor is preventing sales from keeping pace with purchasing and production. Ideally, inventory should be maintained at an optimum level to support production and sales. Inventory turnover ratio is calculated by using the following formula:
Inventory turnover = Cost of goods sold/Average inventory
Average Inventory is obtained using a simple average process by dividing the opening and closing inventory by the two. Cost of goods sold is obtained by deducting gross profit from sales.
A firm has opening and closing inventory of Rs. 56,000 and Rs. 44,000 respectively. The firm has sold goods for Rs. 5,00,000 at gross profit margin of 20%.
The inventory turnover ratio is as follows:
Inventory turnover = Cost of goods sold/Average inventory
(v) Receivables Turnover Ratio:
The ability of a company to collect for credit sales in a timely way affects the company’s liquidity. The relationship between credit sales and accounts receivables may be stated as the receivable turnover. Receivables or debtors turnover determines the liquidity of one item of current assets and funds out how faster debt are being collected.
The formula for computing receivables turnover is as follows:
Receivables turnover = Net Credit Sales/Average accounts receivables or debtors
Receivables turnover shows how many times, on average, the receivables were turned into cash during the period. A high debtors turnover ratio indicates shorter time span between credit sales and cash collection. This ratio requires one balance sheet account and one profit and loss account item. In case, credit sales figure is not given, total sales figure can be used to compute receivables turnover.
A firm has opening and closing debtors of Rs. 40,000 and Rs. 75,000 respectively and credit sales of Rs. 3,45,000.
The debtors turnover ratio is as follows:
3. Profitability Analysis (Or Ratios):
The long-term survival of a business enterprise depends on satisfactory income earned by it. An evaluation of a company’s past profits may give the investors, creditors and others a better understanding for decision-making. The profitability position also affects the liquidity position which is vital to creditors as well.
These ratios are:
(i) Earnings Margin:
It is the ratio of net income to turnover, expressed as a percentage.
Earnings Margin = Net Income/Turnover x 100%
Earnings margin is not the same as margin of profits. Margin of profits refers to the direct operating results only and is the amount before income tax and before non-operating income and charges. In earnings margin, only the final net profit is used.
The Profit and Loss Account of ABC Ltd. is given as follows:
Calculate Earnings Margin.
Earnings Margin = Net Profit after Tax/Sales (Turnover) x 100%
= Rs. 10,00,000/50,00,000 x 100 = 20%
(ii) Return on Capital Employed (ROCE) or Return on Investment (ROI):
This ratio measures profitability in relation to the total capital employed in a business enterprise. The terms invested capital, capital funds and total capital may be used interchangeably. It is a useful ratio when comparing the overall performances of companies, particularly where they have different proportions of debt in their capital structure.
This ratio would also show whether the company’s borrowings policy is wise economically and whether the capital had been employed fruitfully. For example, assume that funds have been borrowed at 8% and return on capital is 7 1/2 it would be better not to borrow unless it is essential.
It would also show that the firm had not been employing the funds efficiently. The business can survive only when the return on capital is more than the cost of capital employed in the business.
Return on Capital = Profit before interest and tax/Total capital employed x 100
According to some analysts, short-term borrowings, such as bank loans, commercial paper, and deferred tax liability, should be included under capital. Current accrued payables which are not interest bearing should be excluded because their interest component is not observable.
Given below is the Balance Sheet of ABC Co. Ltd. as on 31st March, 2008:
(iii) Return on Equity:
Return on equity is derived by taking net income and dividing it by the shareholders’ equity. This indicates the returns which the management is realising from the shareholders’ equity and shows how effectively ordinary shareholder funds are being utilised by the management. As long as it is above the current interest rates, a company is doing fairly well.
Return on Equity= Profit after taxation – Preference Dividends/Ordinary shareholders’ funds x 100%
It is obvious that both the ratios—return on capital and return on equity—will be influenced when a company has raised new capital during the course of the year. That is, in other words, the ratios will be artificially low. Also, the ratios do not take into account the effect of financial leverage which undesirably tends to increase the variability of earnings for the ordinary shares.
In fact, ordinary shareholders of a company having higher dose of borrowings expect large returns to compensate for the high levels of risk. Financial analysts, sometimes in such cases, find out the trade-off between higher earnings and increased variability of earnings to determine whether the management has chosen the optimum amount of financial leverage.
Calculate Return on Equity (ROE) from the following information:
4. Capital Structure or Gearing Analysis (RATIOS):
Gearing ratio, i.e., the relationship of long-term debt to total capital is considered the most important by many investors and financial analysts. Popularly known as debt-equity ratio, this ratio has utility to many including shareholders, creditors, business managers, suppliers and other user groups.
Gearing ratios are used to indicate:
(i) The cushion of assets/profits available to holders of fixed income capital should assets/profits decline.
(ii) The gearing advantage of potentially higher assets/profits attributable to ordinary shareholders and the correspondingly higher risk which is incurred.
(iii) The scope for raising additional fixed-income capital at reasonable costs, from the point of view of the company.
The debt-equity ratio is computed as follows:
Debt-equity ratio = Loan capital + Preference share capital/Net tangible assets x 100
Net tangible assets (or total capital) is obtained by subtracting the intangible assets and the current assets from total assets. Loan capital plus preference capital constitutes the amount of long-term debt. Alternatively, long-term debt can be derived by subtracting current liabilities from total liabilities.
Other variants of Debt-Equity Ratio are as follows:
Sometimes capital gearing is calculated in terms of debt to equity ratio and not total capital. Capital gearing ratios, calculated in these two manners, provide essentially the same information. It is desirable that the investors select a standard method and follow it consistently throughout. It is said that as a rule of thumb, one should not opt for a company whose long-term debt exceeds two-thirds of its total capitalisation.
Debt equity ratio is very helpful in assessing a company—whether the company is marching steadily into or out of debt. In younger and aggressive companies, comparatively speaking the long-term debts may at times exceed the shareholders equity which means that a company will not be able to get out of the difficult situation easily.
A company depending on large amounts of debt should manage and perform well to avoid any worse contingencies. Debt equity ratios should be analysed not for one but for many years to determine a trend. If it is found that equity component is continuously increasing than the long-term debt, there may not be any cause for concern.
From the following, calculate debt-equity ratio:
Interest Coverage Ratio:
Interest coverage ratio determines the debt servicing capacity of a business enterprise keeping in view fixed interest on long-term debt.
The formula for this ratio is:
Coverage ratio = Earnings before Interest and taxes (EBIT)/Interest
If a business enterprise is able to earn a return on the assets higher than the rate of interest on long-term debt, the enterprise makes an overall profit. However, if the enterprise runs the risk of not earnings a return on assets equal to the interest cost of the long-term loan, the enterprise makes an overall loss. The interest coverage ratio measures the degree of protection creditors have from default on the payment of interest by the company.
ABC Ltd. has earned net profit of Rs. 3,50,000 during the year 2007-2008. It has paid income tax Rs. 1,50,000 and interest on debentures as Rs. 1,25,000.
The interest coverage ratio may be calculated as follows:
Profit before interest and tax/Interest
3,50,000 + 1,50,000 + 1,25,000/1,25,000
= 6,25,000/1,25,000 = 5 times.
5. Market Strength Analysis or Investor Analysis:
The market strength analysis or investor analysis are especially important for investors while analysing information about a company. This analysis helps the investors to decide about a company as an investment opportunity at a point of time. These ratios are also known as stock market ratios, investment ratios or market test ratios.
The ratios under this category are as follows:
(i) Earnings per Share:
Earnings per share is derived by dividing the profit of a company by the total number of shares outstanding. Earnings here means the net profit, net income or the net earnings. This is the amount by which the total revenues exceed the total expenses for the year.
Earnings per Share = Earnings after tax – Preference dividends/Number of Ordinary shares
The net earnings figure is the amount which is completely free from any obligations and the company can plough it back into the company, pay to the ordinary shareholders as dividends or a combination of both. This amount is also known as the earnings available for ordinary shareholders.
Net profit before tax Rs. 1,00,000
Tax rate -40% of Net Profit
10% Preferences Share Capital (Rs. 10 each) Rs. 1,00,000
Equity Shares Capital (Rs. 10 Shares) Rs. 1,00,000
Earnings per Share = Net Profit after tax and Pref. dividend/Number of Equity Shares
= Rs. 1,00,000 – 40,000 (Tax) – 10,000 (Pref. Div.)/10,000
= 50,000/10,000 = Rs 5 per share.
Earnings per share can either be primary or diluted. Primary earnings per share is the earnings per share for the number of ordinary shares outstanding as on the beginning of the report period.
Diluted earnings per share, on the other hand, is calculated after taking into account convertible debentures, bonds etc. (which have been converted into ordinary shares) during the year. It is computed in the same manner as primary earnings per share except that it assumes that all investments with the convertibility clause were converted at the beginning of the year.
In case of a company has bonds and debentures which are convertible into ordinary shares, it is always useful to compute fully diluted earnings per share (assuming full conversion) as well as earnings per share on a normal basis. This implies adding back the interest paid on the convertibles, recalculating the numerator and then dividing by the total number of ordinary shares on the assumption that conversion has taken place.
(ii) Dividend per Share:
The dividend per share can be net or gross. Net dividend per share is the dividend declared on a single ordinary share for the year, the net of basic rate tax.
Net Dividend per Share = Ordinary dividends paid to ordinary shareholders/Number 01 ordinary shares
Gross dividend per share is net dividend per share together with the associated tax credit.
Gross Dividend per share = Net dividend per share/1 – Basic rate of tax
Gross Dividend per Share = Net Dividend per Share + Associated Tax Credit.
(iii) Gross Dividend Yield:
The gross dividend yield is the gross dividend per share dividend by the ordinary share price, expressed as a percentage.
Gross Dividend Yield = Gross dividend per share/Ordinary share price x 100%
For example, if a company declares dividend at 20% on its shares, each having a paid-up value of Rs. 8 and market price of Rs. 25, the dividend yield ratio will be calculated as follows:
Dividend per share = 20/100 x 8 = Rs. 1.60
Dividend Yield Ratio = Dividend per share/Market price per share x 100
= 1.6/25 x 100 = 6.4%.
The gross dividend yield indicates the current level of income from a share. Dividend yields are normally calculated using gross dividends rather than net dividends because it helps in better analysis and comparison with other types of investments. Also, investors pay income tax at rates other than the basic rate. If the dividend yield is calculated on a net basis, the level of tax rate which has been deducted should be made clear.
Besides indicating the general level of the market, dividend yield reflects the market estimates of future dividend growth and risk. The higher the dividend growth expectations for a given share, the lower the current yield; the higher the market’s estimate of risk, the higher the current yield.
(iv) Dividend Cover:
Dividend cover denotes the number of times the dividend per share is covered by earnings per share.
Dividend Cover = Earnings per share/Dividend per share
Dividend cover helps in assessing the prospects for dividend increases. Or, alternatively, the possibility of a dividend cut, should profits decline. For the purpose of dividend cover, full distribution earnings per share is normally taken into account. In other words, it is assumed that all profits are distributed as dividends. The gross dividend per share should be taken to ensure consistency in the resulting figure of dividend cover.
(v) Payout Ratio:
Payout ratio measures the proportion of earnings per share which are paid out as dividends.
Payout Ratio = Net dividend per share/Net earnings per share x 100%
The percentage of available earnings paid out as ordinary dividends has a vital influence on the market’s behaviour towards those shares which are not in the growth category.
For those companies which have paid dividends in the form of stock dividends and cash, only the cash dividend should be included in calculating the payout ratio. In the case of dividends paid out as stock dividends, the investor receives nothing that was not already owned and the company gives up nothing of value.
Compute the Pay-out Ratio and Retained Earnings Ratio from the following data:
(vi) Dividends to Cash Flow:
‘Dividends to cash flow’ is a more useful ratio than the payout ratio. It helps in understanding the past trend in this regard and is greatly helpful in estimating future dividends than the conventional payout ratio.
Dividend to Cash Flow = Dividend paid on ordinary shares/Net earnings available for ordinary share
(vii) Price/Earnings (P/E) Ratio:
It is the market price of shares expressed as a multiple of earnings per share.
Price Earnings (P/E) Ratio =: Price per ordinary share/Earnings per share
Many investors consider P/E ratio as the best indicator of the on-going performance of a company. This ratio along with the payout ratio indicates the market estimates of future dividend growth and risk. High growth shares have high P/E ratios as investors are willing to pay a greater multiple of current earnings to achieve a higher future growth.
If high risk is found in a share, it reduces its market price and hence automatically reduces its P/E ratio. Payout ratios can have a positive influence on P/E ratio. High P/Es are not always bad. If investors are willing to pay a high price for a share in relations to its earnings, then they are doing so in the belief that the company has a bright future.
That it will continue to strengthen and grow in future. Buying a share with a high P/E is described as buying a security with a high multiple. It should be understood here that the common share dividends come out of the earnings per share. A drop in earnings could mean that a dividend is in trouble.
The elements which govern the P/E ratio are:
(i) Those factors that are fully reflected in the financial data (tangible factors)—Growth of earnings and sales in the past; Profitability or rate of returns on invested capital; Stability of past earnings; Dividend rate and record, and; Financial strength or credit standing.
(ii) Those factors that are reflected to an indefinite extent in the data (intangible factors)— Quality of management; Nature and prospects of the industry, and competitive position and individual prospects of the company.
(viii) Net Asset Value per Share:
This ratio is also known as the book value per share. Net asset value per share is the value of net tangible assets attributable to one ordinary share. Net asset value is, simply put, the shareholders’ equity. Net asset value or book value has nothing to do with the market value as shares usually sell in the stock market at several times its net asset or book value.
Net Asset value per Share = Ordinary share capital + Reserves – Intangibles/Number of ordinary shares outstanding at balance sheet date
Net asset value applies to ordinary shares only. However, it does not mean that investors can get that amount if the company is liquidated. The amounts attributed to the assets are only attempts at fair and systematic evaluation, not at guessing what these assets would bring if sold in the market place.
Net asset or book value can be considered only as the theoretical value of ordinary shares if the assets of the company were liquidated at the amounts attributed to them on the balance sheet.
It is not unusual for a share price to be very different from the net asset value per share, even where assets in the balance sheet have recently been revalued. In general, the market price of a share will be influenced by earnings and the dividend-paying potential.
Share prices will not be significantly influenced by the net asset value per share except where:
(a) The company is an investment vehicle for specific types of assets (e.g., investment trusts, property companies).
(b) It seems probable that the company will be liquidated.
(c) A takeover bid of the company seems likely.
The net asset value per share figure is useful while comparing shares of one company with shares of other companies operating in the same industry. If it is found that a company is selling shares at a much lower ratio of market price to book value than other companies in the same industry, it indicates a good investment opportunity.
When a share can be bought for less than its net asset value, it is an indication that share will have good value in the future. In case of mutual funds, net asset value ratio is important as it is determined at or near the price at which the mutual fund will buy and sell its shares.
In the stock market, it is often found that a share is selling five times, seven times (and more) its book value. The lower the multiple, the greater will be probable value of the share.
(ix) Cash Flow per Share:
Cash flow per share is a useful indicator of a company’s general ability to leverage itself, to pay dividends, to convert accounting earnings into cash and to enjoy financial flexibility.
Cash Flow per Share = Cash flow from operations after taxes/Ordinary shares outstanding at balance sheet date
The amount of cash flow does not totally belong to ordinary shareholders, as the earnings belong; it is also meant to pay the expenses and claims prior to the payment of dividend.
6. Growth and Stability Analysis Or Ratios:
Growth and stability ratios measure the performance and financial strength of a company apart from market valuation. Stability ratios are useful in evaluating the quality of bonds, debentures, preference shares, etc. These ratios are calculated over time and relate to sales, total returns, and earnings per share.
Such ratios are: