Brian Feroldi on LinkedIn: FINANCIAL RATIOS ➗ Use these 20 ratios to analyze financial statements -… | 39 comments (2024)

Summary to learn the most criticial ratio for assess company’s fundamental

Analyze financial health efficiently with 20 key ratios. Assess liquidity using Net Working Capital, Current Ratio, and Quick Ratio. Examine activity through Accounts Receivable Turnover, Average Collection Period, Inventory Turnover, and Total Asset Turnover. Gauge leverage with Debt Ratio, Debt to Equity Ratio, and Times Interest Earned. Evaluate market value using Earnings Per Share, Price/Earnings Ratio, Book Value, Dividend Yield, and Dividend Payout. Scrutinize profitability via Gross Margin, Profit Margin, Return On Total Assets, and Return On Common Equity.#acccounting #financialaccounting

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Saving for quick reference. Very helpful for bookkeeping

Excellent summary of the most important financial #indicators to review in a #company#akademydigital #finance

Top 12 Accounting Ratios ——————————————————————They’ll help to analyze any company’s Financial Statements And derive actionable insights rather quickly1. Liquidity Ratios- Quick ratio:Assess 90-day liquidity: (Current Assets - Inventories) / Current Liabilities- Current ratio:Assess 12-month liquidity: Current Assets / Current Liabilities- Cashflow coverage ratio:Measures the ability to pay off obligations with operating cash flows: Operating Cash Flows / Total Debt2. Profitability Ratios- Return on investment (ROI):Measure investment effectiveness: (Gain from Investment / Cost of Investment) x 100- Return on equity (ROE):Assess shareholder value creation: Net Income / Shareholder's Equity- Gross margin:Measure financial efficiency: (Revenue - COGS) / Revenue3. Debt Ratios- Debt ratio:Analyze debt proportion: Total Debt / Total Assets- Debt to equity ratio:Evaluate financial leverage: Total Debt / Total Equity4. Efficiency Ratios- Inventory turnover:Analyze inventory sales rate: Cost of Goods Sold / Average Inventory- Asset turnover:Measure revenue generation: Net Sales / Average Total Assets5. Valuation Ratios- Price/earning ratio (PE ratio):Understand stock valuation: Stock Price / Earnings per Share (EPS)- Dividend yield:Calculate shareholder return: Dividends per Share / Stock Price—------------------

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Key financial ratios to calculate monthly?Financial ratios are used to evaluate a company's financial performance and stability. Here are some key financial ratios that you might want to calculate on a monthly basis:1. Current Ratio: This ratio measures a company's ability to pay short-term and long-term obligations. It's calculated by dividing current assets by current liabilities.2. Quick Ratio: Also known as the acid-test ratio, it measures a company's ability to meet short-term obligations with its most liquid assets. It's calculated by subtracting inventories from current assets and then dividing by current liabilities.3. Debt-to-Equity Ratio: This ratio measures a company's financial leverage by dividing its total liabilities by its shareholder's equity.4. Gross Profit Margin: This ratio measures a company's financial health. It's calculated by subtracting the cost of goods sold from net sales, then dividing by net sales.5. Operating Margin: This ratio measures a company's operating efficiency and pricing strategy. It's calculated by dividing operating income by net sales.6. Return on Assets (ROA): This ratio measures how efficiently a company is using its assets to generate profits. It's calculated by dividing net income by total assets.7. Return on Equity (ROE): This ratio measures how efficiently a company is using its equity to generate profits. It's calculated by dividing net income by shareholder's equity.Remember, these ratios should be used in conjunction with other financial information to get a complete picture of a company's financial health. Also, it's important to compare these ratios with industry averages or with the ratios of direct competitors.

Financial Ratios Cheat Sheet⭕ Liquidity RatiosHow easily a company can cover short-term liabilities with short-term assets.Quick Ratio = Quick Cash / Short-Term LiabilitiesCurrent Ratio = Short-Term Assets / Short-Term Liabilities⭕ Solvency RatiosHow much debt a company has.Debt-to-Equity Ratio = Gearing = Leverage = Debt / Shareholders EquityDebt-to-Assets Ratio = Debt / Total Assets⭕ Operating RatiosHow well the operations of a company make a profit.Return On Equity (ROE) = Net Profit / Shareholders EquityReturn On Assets (ROA) = Net Profit / Shareholders Equity + Debt⭕ Valuation RatiosHow the market values a company with respect to its operations.Price/Earnings Ratio (P/E) = Stock Price / Earnings Per SharePrice/Sales Ratio (P/S) = Market Capitalization / Annual SalesPrice/Book Value = Stock Price / Book Value Per Share____________________➕ Follow meNafees Ul Hassan ✨Virtual Bookkeeping and Ecom Expert✨for more content like this.If you found this post useful, please repost ♻️ to make LinkedIn a better platform for all.____________________#financialratios #ifrs #erp #finance #accounting #bookkeeping #projection #forecasting #budgeting

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How to Decode the Numbers and Ratios in Financial Statements: A Practical Approach.✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️✅️A Financial statements are like the vital signs of a company. They tell you how healthy, strong, and valuable the company is. They also reveal the problems, risks, and opportunities that the company faces. To analyze financial statements, you need to know how to read them, compare them, and calculate them. Here are some of the ways you can do that:- Read the balance sheet, the income statement, and the cash flow statement. These are the three main types of financial statements that show the company's assets, liabilities, equity, revenues, expenses, profits, and cash flows. They follow some basic equations that you need to understand: Assets = Liabilities + Equity, Revenues - Expenses = Net Income, and Cash Flow from Operating Activities + Cash Flow from Investing Activities + Cash Flow from Financing Activities = Net Change in Cash.- Compare the same items or ratios across different periods or with other companies. This is called horizontal analysis and it helps you identify trends and changes in the company's financial performance, position, and cash flows. For example, you can compare the revenue growth rate or the net profit margin of a company over several years or with its competitors to see how it is doing over time or in the market.- Compare different items or ratios within the same period or statement. This is called vertical analysis and it helps you identify proportions and relationships in the company's financial performance, position, and cash flows. For example, you can compare the cost of goods sold or the operating expenses to the revenue of a company to see how much of its revenue is consumed by these costs or how efficient it is.- Calculate and compare various financial ratios that measure different aspects of the company's financial performance, position, and cash flows. This is called ratio analysis and it helps you assess the company's liquidity, profitability, solvency, efficiency, and valuation. For example, you can calculate and compare the current ratio, the return on equity, the debt-to-equity ratio, the inventory turnover, and the price-to-earnings ratio of a company to see how liquid, profitable, solvent, efficient, and valuable it is.From Waqar

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How to analyze a Cash Flow Statement in <2 minutes:Understand these cash flow formulas.The Cash Flow Statement shows a company's profitability at multiple levels over a period of time using cash accounting.3 Main sections:💰 OPERATING ACTIVITIESShows cash inflows & outflows from normal operations💰 INVESTING ACTIVITIESShows cash outflows from capital expansion & long-term investments💰 FINANCING ACTIVITIESShows cash changes to the company’s capital structure6 Cash Flow Ratios to watch💳 LIQUIDITY RATIOSCash Ratio = Cash Balance ➗ Current LiabilitiesCurrent Ratio = Current Assets ➗ Current Liabilities⛱ COVERAGE RATIOSCash Coverage Ratio = Cash Balance ➗ Interest ExpenseDebt To OCF = Total Debt➗ Operating Cash Flow⚖ VALUATION RATIOSPrice to CFFO = Share Price ➗ Cash Flow From Operations Per SharePrice to FCF = Share Price ➗ Free Cash Flow Per ShareWhich ratio do you think is the most useful? Let me know in the comments below!****📌 P.S. Want help understanding how to analyze a balance sheet?Join me for a FREE webinar on Tuesday, 12/19: The Investor's Guide To Financial Statements. RSVP here (it's free!): https://lnkd.in/etqqtJq7If this post was helpful, please repost ♻️ to make LinkedIn a better platform for all.

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Financial ratios are numerical tools used to analyze different aspects of a company's financial statements. They help assess performance, financial health, and operational efficiency by illustrating relationships between key financial metrics

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