Introduction of the Financial Ratios
Study of The Financial Ratios: what is the Financial Ratios
You can use financial ratios to see how well a company is doing financially. So we can see how much a company is making, how well it's using its resources, how much debt it has, and how much it's worth on the market. We should keep in mind, though, that not every number is good for every business. This guide will explain the most important factors for evaluating a business and explain why they're important.
People know Benjamin Graham as the "father of fundamental analysis" because he made the theory of financial ratios famous.
Financial ratios help you understand the results and see how they stack up against other companies in the same business and previous years.The ratio only makes sense when you look at it in the context of another company of the same size or the overall trend of financial ratios. This means that once the ratio is calculated, it needs to be analyzed (either by comparing it to other ratios or looking at its past trend) to get the best conclusion.
Different companies and financial years may have different rules for accounting. This is something that a fundamental analyst should know, so they should change the data to reflect this before they calculate the financial ratio. Here are some common business ratios:
- Liquidity Ratios
- Solvency Ratios
- Profitability Ratios
- Efficiency Ratios
- Market Ratios
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Table of Contents: Study of The Financial Ratios 1. Introduction of the Financial Ratios |
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