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

Before we consider the various ratios used by fundamental analysts and how they work, it’s useful to briefly discuss where you can find the data needed for these ratios.

For the ratios we will be looking at in this tutorial, we will be using the example of a fictitious company that we’ve made up: Cory's Tequila Co (CTC). All the data for these examples will be provided using made-up financial statements and sources, but when you decide to go out and do this on your own, you’ll need to know where to look to find the latest financial figures for a particular company.

Luckily, finding financial reports is easier than ever thanks to the Internet. Using the following resources, you’ll want to extract [1] the balance sheet, [2] income statement and [3] statement of cash flows. The balance sheet summarizes a company’s assets & liabilities and represents a snapshot in time of its financial status. The income statement shows a company’s profit & loss over a reporting period, and the cash flow statement shows where money flows within a company. Some ratios will draw on figures found from multiple sources – for example a ratio’s numerator may come from the income statement while the denominator from the balance sheet.

  • Company Websites - Almost every public company has its own website and a section of that site devoted to investor relations (IR). For the most current quarterly or annual report you might want to check in these pages first. Walt Disney (DIS) is an excellent example of a company that uses the web to get information out to shareholders and prospective investors. It takes no time at all to find their investor relations section (https://thewaltdisneycompany.com/investor-relations/).
  • Securities and Exchange Commission (SEC) - The information posted in the electronic gathering, analysis and retrieval (EDGAR) database includes the annual report (known as the 10-K), quarterly report (10-Q), and a myriad of other forms that contain every type of financial data.
  • Public investing websites such as Google finance, Yahoo! Finance, Morningstar, Zack’s and Marketwatch typically have access to a company’s financial statements that you can find when you load up a stock quote. For example, on Google Finance, you can access Disney’s financial statements here.
  • Paywalled or subscription/customer-facing investing websites including online brokers, investment firms, or data providers like Bloomberg and Hoovers.com will also give you access to the same documents, but may provide you with greater detail or a longer archive of historical data.

These are by no means the only places to find the financial statements, there are countless free and pay sites out there offering similar features. Now let's move onto the meat of this tutorial: the ratios.

Ratio Analysis: Using Financial Ratios
Related Articles
  1. Investing

    Ratio Analysis Tutorial

    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.
  2. Investing

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  3. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  4. Investing

    Reading the Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  5. Investing

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  6. Investing

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  7. Investing

    Analyzing Google's Balance Sheet

    We take a look at Google's balance sheet to learn about the health of the company and how well it is run.
Frequently Asked Questions
  1. How did moral hazard contribute to the 2008 financial crisis?

    Learn about moral hazard, how it can affect outcomes and how it contributed to the conditions that led to the 2008 financial ...
  2. Which mutual funds made money in 2008?

    Read about the only mutual fund that turned a profit in 2008. Learn about risk-averse investment strategies and the financial ...
  3. Were Collateralized Debt Obligations (CDO) Responsible for the 2008 Financial Crisis?

    Collateralized debt obligations are exotic financial instruments that can be difficult to understand, Learn the role they ...
  4. How do I find historical prices for stocks?

    Historical stock prices help investors evaluate a company's performance in the public markets over time, and can be a valuable ...
Trading Center