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

Ratio Analysis: Using Financial Ratios

There is a lot to be said for valuing a company, it is no easy task. If you have yet to discover this goldmine, the satisfaction one gets from tearing apart a companies financial statements and analyzing it on a whole different level is great - especially if you make or save yourself money for your efforts.

In this section we will try to present 19 basic fundamental analysis ratios to help you get started. The ratios are presented in a simplified manner to make them easier to understand. Sure some of the ratios have different varieties, but by the end you will understand the basic premise and reasons for fundamental analysis.

The Ratios:

Performance Activity
Book Value Per Common Share Asset Turnover
Cash Return On Assets Average Collection Period
Vertical Analysis Inventory Turnover
Dividend Payout Ratio Financing
Earnings Per Share Debt Ratio
Gross Profit Margin Debt / Equity Ratio
Price/Earnings Ratio Liquidity Warnings
Profit Margin Acid-Test Ratio
Return on Assets Interest Coverage
Return on Equity Working Capital

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

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  2. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and ...
  3. Liquidity

    The degree to which an asset or security can be quickly bought ...
  4. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  6. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  1. Why might two companies calculate capital employed differently?

    The primary reason there are different ways of calculating a company's capital employed is because there are different definitions ... Read Full Answer >>
  2. What information should I look at on a publicly traded company for use in fundamental ...

    In finance, fundamental analysis focuses on estimating a company's value based on the underlying factors that affect its ... Read Full Answer >>
  3. How do you analyze inventory on the balance sheet?

    In accounting, inventory represents a company's raw materials, work in progress and finished products. Financial professionals ... Read Full Answer >>
  4. To what extent should you take a company's liquidity ratio into account before investing ...

    Investors, analysts and lenders use financial ratios to evaluate the health of businesses. Liquidity ratios highlight the ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!