The Hindu Business Line : Unlock ratios to find riddles to reason and reckon

THE likelihood of one individual being right increases in direct ratio to the intensity with which others try to prove him wrong, said Leonore Fleischer. With different ratios being spoken about in the case of Reliance, it may well be confusion that increases in direct ratio to the statements.

For instance, www.ril.com informs that all shareholders of RIL, except the `Specified Shareholders', would be issued shares of de-merged undertakings in 1:1 ratio. But Mukesh had earlier spoken of a different share-swap ratio, with every 100 shares in RIL fetching in five shares of Reliance Capital Services, seven shares of Reliance Energy, 100 shares of Global Fuel Management and 100 shares of Reliance Communications Ventures.

No `swap' because the members could keep their shareholding in RIL, it has been assured, though it may seem odd to say that the stock ratios are not based on any valuation, but rather, on "the fairness principle, pricing and par value".

Even as shareholders eagerly look at ratios as magic keys to unlock value, and FIIs try to come to terms with the prospect of having their holdings in unlisted companies, at least in the interregnum, let us study the word-for-the-week, `ratio'.

Quantitative relation between two amounts showing the number of times one value contains or is contained within the other, defines Concise Oxford English Dictionary, in an entry that follows rating.

The origin is from Latin, literally, `reckoning', from reri, `reckon', explains the dictionary. "1636, `reason, rationale,' from L. ratio `reckoning, calculation, business affair, procedure,' also `reason,' from rat-, pp. stem of reri `to reckon, calculate,' also `think' (see reason).

Mathematical sense is attested from 1660," traces Online Etymology Dictionary. In `reason', it refers to "O.E. rædan `to advise'; see read," and in `read' the entry cites "Skt. radh- `to succeed, accomplish,' Gk. arithmos `number amount,' O.C.S. raditi `to take thought, attend to,' O.Ir. im-radim `to deliberate, consider'). Connected to `riddle' via notion of `interpret.'" No wonder, therefore, that ratio is the big riddle now.

Ratio is the indicated quotient of two mathematical expressions; or, the relationship in quantity, amount, or size between two or more things, according to Merriam-Webster Online Dictionary.

It is also "the expression of the relative values of gold and silver as determined by a country's currency laws". Ratio decidendi is Latin for `grounds for deciding'; it is the principle or rule constituting the basis of a court decision, informs www.answers.com. "The legal, moral, political, and social principles used by a court to compose the `rationale' or ratio decidendi of a particular judgment.

Unlike Obiter Dictum, the principles of judgment for ratio decidendi stand as potentially binding precedent, through the principle of stare decisis," is a snatch from http://en.wikipedia.org.

The term ratio is sometimes applied to the difference of two quantities as well as to their quotient, in which case the former is called arithmetical ratio, the latter, geometrical ratio, states Webster Dictionary, 1913, and adds that the name ratio is sometimes given to the rule of three in arithmetic, a rule which directs, when three terms are given, how to find a fourth, which shall have the same ratio to the third term as the second has to the first. Don't forget that it was Thomas Malthus who frightened everybody saying that population, when unchecked, increases in a geometrical ratio.

In algebra, a ratio is the relationship between two quantities, says Wikipedia, before elaborating that ratios aren't exactly the same thing as vulgar fractions, and that the most common thing to do with ratios is to multiply them.

It seems the `golden ratio' is an irrational number, approximately 1.618, with many interesting properties! For shareholders who are anxiously waiting, golden ratio would be the one that unlocks the maximum value.

"In general, a ratio is a way of concisely showing the relationship between two quantities of something," explains http://whatis.techtarget.com. For a ratio to have meaning, both numbers must be nonzero, it stipulates, and elaborates:

"The most formal way of stating a ratio is by separating the two quantities with a colon (:) although sometimes a division sign (/) is used in place of the colon. Thus, where there is a ratio of 5:2 between apples and oranges, for each five apples, there are two oranges."

At times you can't compare apples and oranges. "In physics, the two quantities must have the same units to be `similar'," notes `A Glossary of Frequently Misused or Misunderstood Physics Terms and Concepts'. While you can speak of the ratio of two lengths, it would be improper to say "the ratio of charge to mass of the electron".

We have lost one shuttle for every 57 flights and that is not a good ratio, is a quote of Lincoln Davis, who sees merit in the Russian practice of using unmanned vehicles to transport hardware into space. "If in a group of 100 people 5 die, the ratio of deaths to the total number in the group is 5/100=1/20=.05," is an example on www.encyclopedia.com.

On Rhymezone, `words and phrases that rhyme with ratio' are fellatio and horatio, and on the latter, there's a line from Hamlet, "O good Horatio, what a wounded name," and again, just the Prince of Denmark meets with his end, "O, I die, Horatio."

Ratio analysis is "the use of ratios to evaluate a company's operating performance and financial stability," defines Oxford Dictionary of Business.

The Web site www.investorwords.com can educate you on a variety of ratios such as price/earnings, quick, asset/equity, bid-to-cover, book-to-bill, cash, conversion, coverage, current, debt/equity, expense, fixed-charge coverage, income replacement, mint, net capital, odd lot buy/sell, operating, payout, price to book, price to cash flow, price to sales, put/call, short interest, theta, turnover, relative volatility, and so forth.

"For a manager to be perceived as a positive manager, they need a four to one positive to negative contact ratio," demands Kenneth H. Blanchard.

"Nominally, there is one executive for every eight federal employees, a ratio that would bankrupt many private industries," comments Martin L. Gross.

There's a high danger ratio in running such a Government, though its survival ratio may be miraculously high! On a subtler plane, here is H. G. Wells laying down as `the only true measure of success', the ratio between what we might have done and what we might have been on the one hand, and the thing we have made and the things we have made of ourselves on the other.

Easier to measure may be the success of the share ratio now in question, with eyes locked on value that gets unlocked in due course.

ComingToTerms@TheHindu.co.in

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