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Ratio Analysis 101 from

Posted on the 17 April 2014 by Socialmediaevie @socialmediaevie
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Click on this pin from Investopedia:

This pin will lead you to my “Financial Ratio” Pinterest Board

Where you will find this tutorial:

It explains every ratio that we have discussed in this class.

Watch this video for review:

“Fundamental analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn’t just comparing different numbers from the balance sheet, income statement and cash flow statement. It’s comparing the number against previous years, other companies, the industry or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and how it might perform in the future.

For example, current assets alone don’t tell us a whole lot, but when we divide them by current liabilities we are able to determine whether the company has enough money to cover short-term debts.
Comparing these ratios against numbers from previous years, other companies, industry averages and the economy in general can tell you a lot about where a company might be headed. Valuing a company is no easy task. This tutorial will shed some light on how it can be done and, ultimately, help you to make more informed choices as an investor.

There is a lot to be said for valuing a company, it is no easy task. If you have yet to discover this goldmine, the satisfaction one gets from tearing apart a companies financial statements and analyzing it on a whole different level is great – especially if you make or save yourself money for your efforts.
Here is a list of 19 basic fundamental analysis ratios to help you get started. You have these formulas in your textbook.

The Ratios:

Performance Activity

Book Value Per Common Share Asset Turnover

Cash Return On Assets Average Collection Period

Vertical Analysis Inventory Turnover

Dividend Payout Ratio Financing

Earnings Per Share Debt Ratio

Gross Profit Margin Debt / Equity Ratio

Price/Earnings Ratio Liquidity Warnings

Profit Margin Acid-Test Ratio

Return on Assets Interest Coverage

Return on Equity Working Capital

Taken directly from the website

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