Books and eBooks:
Performing Financial Studies by Financial ratios are an essential source of information for analyzing company financial data. By comparing the ratios to previous years and to other businesses in the same industry, it is possible to make judgments about a firm's basic financial health and to determine operating trends.
The following are some of the ratios commonly used in analysis.
For more information on the items under the Source column, please see the tab entitled Annual Reports and SEC Filings (from Business: Company & Industry Research guide).
| RATIO | DEFINITION | SOURCE |
|
1. Current Ratio |
Total current assets divided by total current liabilities. | Balance Sheet |
|
2. Quick Ratio |
The sum of cash and accounts receivable divided by total current liabilities. | Balance Sheet |
|
3. Price/Earnings Ratio |
Average common stock price divided by net income per share | Stock price listings, Balance Sheet & Statement of Consolidated Earnings |
|
4. Sales to Inventory |
Annual net sales divided by inventory. | Statement of Consolidated Earnings & Balance Sheet |
|
5. Total Liabilities to Net Worth |
Total liabilities divided by net worth. | Balance Sheet & Statement of Consolidated Earnings |
|
6. Return on Sales |
Net profit after taxes divided by annual net sales. | Statement of Consolidated Earnings |
|
7. Return on Net Worth |
Net profit after taxes divided by net worth. | Balance Sheet & Statement of Consolidated Earnings |
