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 working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  6. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
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!