Research Guides: Industry & Company Ratio Analysis: Home

What are Financial Ratios?

Ratio analysis is a quantitative investment technique used to compare a company on a relative basis to the market in general. Changes in ratios can help signal important changes in the direction of the company's fortunes.

Examples of common ratios include:

PRICE/EARNINGS RATIO

The P/E ratio is the ratio of the current stock price to the current year earnings per share estimate when available, or, if not available, to earnings per share for the last 12 months. P/E ratios can vary widely among companies.

ACID-TEST RATIO

The acid-test ratio, or quick ratio, is used to measure corporate liquidity. The acid-test formula is stated as current assets less inventory divided by current liabilities. Normally, an acid-test ratio of 1:1 is satisfactory. However, an interruption or slowdown of cash receipts could spell trouble. Conversely, a company with a high acid-test ratio may not be using its capital effectively.

DEBT-TO-EQUITY RATIO

The debt-to-equity ratio is the relationship of a company's total debt to total shareholders' equity. It can be used to estimate the vulnerability of future earnings to variation.

Financial Ratio Calculators & Formulas

This information will enable you to understand the components that comprise the composition of Financial Ratios.

Financial Ratios Calculators
Financial ratios are a way to evaluate the performance of your business and identify potential problems. Each ratio informs you about factors such as the earning power, solvency, efficiency and debt load of your business.
Small Business Ratio Calculators
A financial ratio is a simple mathematical comparison of two or more entries from a company's financial statements used to chart a company's progress, uncover trends and point to potential problem areas in a business.
Dinkytown
This calculator is designed to show you 10 different financial ratios. Financial ratios are used as indicators that allow you to zero in on areas of your business that may need attention such as solvency, liquidity, operational efficiency and profitability.

Web Resources

More information on Ratios:

NetMBA
Overview and information on all types of financial ratios.
6 Basic Financial Ratios and What They Reveal (Investopedia.com)
Basic ratio information.

Ebooks

Financial Ratios by Sandeep Goel
ISBN: 9781631573606
Publication Date: 2015-12-24
Financial ratios are an important technique of the financial analysis of a business organization. Effective financial management is the key to running a financially successful business. Ratio analysis is critical for helping you understand financial statements, for identifying trends over time, and for measuring the overall financial health of your business. Lenders and potential investors often rely on ratio analysis for making lending and investing decisions. This book aims to not only develop an understanding of the concepts of financial ratios but also to provide the students a practical insight into the application of financial ratios for decision making and control. It analyzes the financial statements of corporate enterprises in India in diverse sectors with the help of financial ratios in order to facilitate the learning process.

Click on the links below to see more ebooks available through the library's catalog: