Dividend yield ratio = Dividend per share / Share price The earnings per share ratio measures the amount of net income earned for each share outstanding: Earnings per share ratio = Net earnings / Total shares outstanding
What are financial ratios?
Financial ratios are created with the use of numerical values taken from financial statements to gain meaningful information about a company. The numbers found on a company’s financial statements – balance sheet
What is the difference between dividend yield ratio and earnings per share?
The dividend yield ratio measures the amount of dividends attributed to shareholders relative to the market value per share: Dividend yield ratio = Dividend per share / Share price The earnings per share ratio measures the amount of net income earned for each share outstanding: Earnings per share ratio = Net earnings / Total shares outstanding
Which financial ratios should be included in an exhibit?
One of the most important categories of financial ratios are the liquidity ratios. In case analysis, it is best to make an exhibit that includes all the financial ratios. An important liquidity ratio is Earnings per Share (EPS). Key liquidity ratios include the current ratio, quick ratio, and cash ratio.
What is price earnings ratio (P/E ratio)?
Price Earnings Ratio The Price Earnings Ratio (P/E Ratio is the relationship between a company’s stock price and earnings per share. It provides a better sense of the value of a company.
What are the 4 types of ratios?
Typically, financial ratios are organized into four categories:Profitability ratios.Liquidity ratios.Solvency ratios.Valuation ratios or multiples.
What are the 5 key 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 does efficiency ratio indicate?
Efficiency ratios measure a company's ability to use its assets and manage its liabilities effectively in the current period or in the short-term. Although there are several efficiency ratios, they are similar in that they measure the time it takes to generate cash or income from a client or by liquidating inventory.
What is P&L ratio?
What Is the Profit/Loss Ratio? The profit/loss ratio acts like a scorecard for an active trader whose primary motive is to maximize trading gains. The profit/loss ratio is the average profit on winning trades divided by the average loss on losing trades over a specified time period.
What are the 3 types of ratios?
The three main categories of ratios include profitability, leverage and liquidity ratios.
What are the financial ratios and its types?
These ratios are applied according to the results required, and these ratios are divided into five broad categories: liquidity ratios, leverage financial ratios, efficiency ratios, profitability ratios, and market value ratios.
What does liquidity ratio measure?
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the calculation of metrics including the current ratio, quick ratio, and operating cash flow ratio.
What is analysis ratio?
Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by studying its financial statements such as the balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity analysis.
How is solvency ratio calculated?
SummaryThe solvency ratio helps us assess a company's ability to meet its long-term financial obligations.To calculate the ratio, divide a company's after-tax net income – and add back depreciation– by the sum of its liabilities (short-term and long-term).More items...•
What are composite ratios?
A composite ratio or combined ratio compares two variables from two different accounts. One is taken from the Profit and Loss A/c and the other from the Balance Sheet. For example the ratio of Return on Capital Employed.
What are the income statement ratios?
These ratios are derived from income statements. Some of the most common ratios include gross margin, profit margin, operating margin, and earnings per share. The price per earnings ratio can help investors determine how much they need to invest in order to get one dollar of that company's earnings.
What does PnL mean in trading?
Profit and Loss ExplainedIn investment banking, PnL Explained (also called P&L Explain, P&L Attribution or Profit and Loss Explained) is an income statement with commentary that attributes or explains the daily fluctuation in the value of a portfolio of trades to the root causes of the changes.
Liquidity Ratios
Leverage Financial Ratios
Efficiency Ratios
- Efficiency ratios, also known as activity financial ratios, are used to measure how well a company is utilizing its assets and resources. Common efficiency ratios include: The asset turnover ratiomeasures a company’s ability to generate sales from assets: Asset turnover ratio = Net sales / Average total assets The inventory turnover ratiomeasures how many times a company’s inven…
Profitability Ratios
- Profitability ratiosmeasure a company’s ability to generate income relative to revenue, balance sheet assets, operating costs, and equity. Common profitability financial ratios include the following: The gross margin ratiocompares the gross profit of a company to its net sales to show how much profit a company makes after paying its cost of goods sold: Gross margin ratio = Gro…
Market Value Ratios
- Market value ratios are used to evaluate the share price of a company’s stock. Common market value ratios include the following: The book value per share ratio calculates the per-share value of a company based on the equity available to shareholders: Book value per share ratio = (Shareholder’s equity – Preferred equity) / Total common shares outsta...
Related Readings
- Thank you for reading CFI’s guide to financial ratios. To help you advance your career in the financial services industry, check out the following additional CFI resources: 1. Analysis of Financial Statements 2. How the 3 Financial Statements are Linked 3. Comparable Company Analysis 4. Types of Financial Models