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What are the 10 most important financial ratios?

What are the 10 most important financial ratios?

Top 10 Most Popular Financial Ratios

  1. Price to Earnings Ratio (P/E) P/E ratio falls under the category of price ratio.
  2. Price to Earnings Growth Ratio (PEG)
  3. Price to Book Ratio (P/B)
  4. Return on Assets (RoA)
  5. Profit Margin.
  6. Current Ratio.
  7. Quick Ratio.
  8. Debt-to-Equity Ratio.

What is the most useful financial ratio?

Indicates whether a business has sufficient cash flow to meet short-term obligations, take advantage of opportunities and attract favourable credit terms. A ratio of 1 or greater is considered acceptable for most businesses. Indicates a company’s ability to pay immediate creditor demands, using its most liquid assets.

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What are the four main financial ratios?

In general, financial ratios can be broken down into four main categories—1) profitability or return on investment; 2) liquidity; 3) leverage, and 4) operating or efficiency—with several specific ratio calculations prescribed within each.

What are the five most important financial ratios?

Five of the key financial ratios are the price-to-earnings ratio, PEG ratio, price-to-sales ratio, price-to-book ratio, and debt-to-equity ratio.

What are the 5 major categories of ratios?

Ratio analysis consists of calculating financial performance using five basic types of ratios: profitability, liquidity, activity, debt, and market.

What are good profitability ratios?

Owners and managers should carefully watch the three most important profitability ratios: gross profit, operating profit, and net profit.

What is good current ratio?

In general, a good current ratio is anything over 1, with 1.5 to 2 being the ideal. If this is the case, the company has more than enough cash to meet its liabilities while using its capital effectively.

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What are the six 6 basic financial statements?

The basic financial statements of an enterprise include the 1) balance sheet (or statement of financial position), 2) income statement, 3) cash flow statement, and 4) statement of changes in owners’ equity or stockholders’ equity. The balance sheet provides a snapshot of an entity as of a particular date.

What are the key financial ratios for a company?

Key ratios are the main mathematical ratios that illustrate and summarize the current financial condition of a company. Key ratios can be used to easily obtain an idea of a company’s financial status. Companies that are in good condition financially will have superior ratios to those that are performing poorly.

What ratios are important in banking sector?

Profitability ratios such as return on asset (ROA) and return on equity (ROE)

  • Capital adequacy ratios such as Common Equity Tier 1 capital ratio
  • Asset quality ratios such as loan quality ratio
  • Efficiency ratios such as retail banking staffing ratio
  • Liquidity ratios such as short-term funding ratio
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    What are the five major categories of ratio?

    Categories of Financial Ratios Liquidity and Solvency Ratios. Liquidity ratios focus on a firm’s ability to pay its short-term debt obligations. Financial Leverage Ratios. The financial leverage or debt ratios focus on a firm’s ability to meet its long-term debt obligations. Turnover Ratios. Sometimes called asset efficiency ratios, turnover ratios measure how efficiently a business is using its assets.

    What are the uses of financial ratios?

    Financial ratios are tools used to assess the relative strength of companies by performing simple calculations on items on income statements, balance sheets and cash flow statements. Ratios measure companies’ operational efficiency, liquidity, stability and profitability, giving investors more relevant information than raw financial data.