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
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