Ratio Analysis Tutorial
  1. Ratio Analysis: Introduction
  2. Ratio Analysis: Finding The Data
  3. Ratio Analysis: Using Financial Ratios

Ratio Analysis: Introduction

Fundamental analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement and cash flow statement. It's comparing the number against previous years, other companies, the industry or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and how it might perform in the future.

For example, current assets alone don't tell us a whole lot, but when we divide them by current liabilities we are able to determine whether the company has enough money to cover short-term debts.

In this tutorial, we'll show you how to use ratio analysis to analyze financial reports. Comparing these ratios against numbers from previous years, other companies, industry averages and the economy in general can tell you a lot about where a company might be headed. Valuing a company is no easy task. This tutorial will shed some light on how it can be done and, ultimately, help you to make more informed choices as an investor.

Ratio Analysis: Finding The Data

  1. Ratio Analysis: Introduction
  2. Ratio Analysis: Finding The Data
  3. Ratio Analysis: Using Financial Ratios
RELATED TERMS
  1. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
  3. Financial Analysis

    The process of evaluating businesses, projects, budgets and other ...
  4. Key Ratio

    A mathematical ratio that illustrates and summarizes the current ...
  5. Combined Ratio

    A measure of profitability used by an insurance company to indicate ...
  6. Accounting Ratio

    A way of expressing the relationship between one accounting result ...
RELATED FAQS
  1. What types of information does one need to perform a thorough financial analysis?

    Understand what types of information an analyst needs to examine for a thorough financial analysis, and learn how to use ... Read Answer >>
  2. How do stock dividends affect the retained earnings account?

    Understand the difference between financial ratio analysis and accounting ratio analysis. Learn why ratio analysis is important ... Read Answer >>
  3. Why do shareholders need financial statements?

    Discover the importance of a company's financial statements for stock shareholders in evaluating their equity investment ... Read Answer >>
  4. How does ratio analysis make it easier to compare different companies?

    Learn what ratio analysis is, how investors can compare companies within the same sector using ratio analysis and how ratios ... Read Answer >>
  5. If a company has a high debt to capital ratio, what else should I look at before ...

    Learn about some of the financial leverage and profitability ratios that investors can analyze to supplement examining the ... Read Answer >>
  6. What role does ratio analysis play in valuing a company?

    Learn about the role of ratio analysis in determining company value, including some of the most common ratios used by modern ... Read Answer >>

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center