Accounting Ratio

Dictionary Says

Definition of 'Accounting Ratio'

A way of expressing the relationship between one accounting result and another, which is intended to provide a useful comparison. Accounting ratios assist in measuring the efficiency and profitability of a company based on its financial reports. Accounting ratios form the basis of fundamental analysis.

Also called financial ratio.

Investopedia Says

Investopedia explains 'Accounting Ratio'

An accounting ratio compares two aspects of a financial statement, such as the relationship (or ratio) of current assets to current liabilities. The ratios can be used to evaluate the financial condition of a company, including the company's strengths and weaknesses. An example of an accounting ratio is the price-to-earnings (P/E) ratio of a stock. This measures the price paid per share in relation to the profit earned by the company per share in a given year.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Price-Earnings Ratio - P/E Ratio

    A valuation ...
  2. Accountant

    A professional ...
  3. General Ledger

    A company's main ...
  4. Multiple

    A term that ...
  5. Price/Earnings To Growth - PEG Ratio

    A stock's ...
  6. Operating Income

    The amount of ...
  7. Risk

    The chance that ...
  8. Earnings Before Interest & Tax - EBIT

    An indicator of ...
  9. Inventory Turnover

    A ratio showing ...
  10. Profit Margin

    A ratio of ...

Articles Of Interest

  1. A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  2. Reverse Engineering Return On Equity

    Return on equity is a widely used ratio, but return on net operating assets (RNOA) takes things one step farther.
  3. CFA Level 1 - Chapter 7: Financial Ratios

    Financial Ratios...
  4. Ratio Analysis: Using Financial Ratios

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  5. Debt Ratios: Cash Flow To Debt Ratio

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  6. Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.
  7. How To Find P/E And PEG Ratios

    If these numbers have you in the dark, these easy calculations should help light the way.
  8. How To Make A Winning Long-Term Stock Pick

    Discover the key elements of a good long-term investment and how to find them.
  9. Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
  10. Spotting Profitability With ROCE

    This straightforward ratio measures whether a company is efficient, money-making or neither.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center