< Back to Business

Chapter 4

Financial Ratio Analysis

Chapter 4

Financial Ratio Analysis

Financial ratios are quantitative tools that analyze and assess the financial health, performance, and stability of a business. They are derived from the …
Ratios are tools that help evaluate a business's financial health and financial performance. Liquidity ratios, profitability ratios, activity ratios, …
Ratio analysis is a financial tool that enables firms to make informed decisions based on their financial condition and operational efficiency. By …
Liquidity ratios are financial metrics that assess a company's ability to meet its short-term obligations. Consider Jerry, a financial analyst in a …
The current ratio is a financial metric used to assess a company's ability to pay its short-term obligations with its short-term assets. To calculate …
The quick ratio, or an acid-test ratio, is a financial metric evaluating a company's short-term liquidity without relying on the sale of inventory. …
The liquid or cash ratio is a financial metric to evaluate a company's ability to cover its short-term liabilities with its most liquid assets, namely …
Profitability ratios assess a company's ability to generate earnings relative to its revenue, assets, and equity by effectively managing its …
The Gross Profit Ratio indicates the proportion of money left over from revenues after accounting for the cost of goods sold. This ratio is significant as …
The net profit ratio measures a company's profitability by providing insights into its efficiency in converting revenue into actual profit after …
Return on equity measures a company's profitability relative to shareholders' equity, reflecting how effectively management uses equity capital to …
Return on Assets is a financial ratio that measures a company's ability to generate profit from its assets. A higher ratio indicates more efficient …
Return on Capital Employed is a financial metric that measures a company's profitability and the efficiency with which its capital is employed. It is …
Earnings per share is a financial metric that indicates a company's profitability on a per-share basis. It is calculated by dividing a company's …
The price-earnings ratio is a financial metric used to evaluate a company's stock price relative to its earnings. It is calculated by dividing the …
Solvency ratios are crucial indicators to measure a company's ability to meet its long-term debt obligations. Solvency ratios differ from liquidity …
The Debt-to-Equity ratio is a financial metric that measures a company's financial leverage by comparing its total liabilities to its …
The proprietary ratio assesses the proportion of a company's total assets financed by shareholder equity. This ratio is important as it indicates a …
The interest coverage ratio measures a company's ability to pay interest on its debt. It shows how easily a company can cover its interest expenses …
Activity ratios are important indicators that measure a company's efficiency in utilizing its assets to generate sales and revenue. Activity ratios …
The total asset turnover ratio measures a company's efficiency in using its assets to generate sales. This ratio indicates how many dollars of sales …
The fixed asset turnover ratio measures a company's efficiency in using its fixed assets to generate sales. The fixed asset turnover ratio is …
The Current Asset Turnover Ratio is an essential financial metric that indicates how efficiently a company uses its current assets to generate revenue. It …
Working capital is the difference between a company's current assets and current liabilities. It measures a company's short-term financial health …
The Working Capital Turnover Ratio measures how efficiently a company utilizes its working capital to generate sales. Working capital is the money …
The stock turnover ratio, also known as inventory turnover ratio, measures how efficiently a company manages its inventory. For calculating the stock …
The accounts receivable turnover ratio measures how efficiently a company collects payments owed by its customers for credit sales. It is calculated by …
An accounts payable turnover ratio measures how efficiently a company pays its suppliers or creditors over a specific period. The accounts payable …