Financial Ratios & Analysis - Accounting Play 1 www.AccountingPlay.com Financial Ratios & Analysis - Accounting Play Financial Ratios & Analysis Accounting Play 2 www.AccountingPlay.com Financial Ratios & Analysis - Accounting Play Table of Content Copyright and Legal ....................................................................................................................................... 7 Using Financial Ratios & Analysis ................................................................................................................... 8 Audio ......................................................................................................................................................... 8 Topics ........................................................................................................................................................ 8 Using Financial Ratios & Analysis ............................................................................................................... 8 About ............................................................................................................................................................. 9 Financial Ratios in Concept ............................................................................................................................ 9 Audio ......................................................................................................................................................... 9 Topics ........................................................................................................................................................ 9 Stakeholders .............................................................................................................................................. 9 Analysis .................................................................................................................................................... 10 Decision Making ...................................................................................................................................... 12 Why Use Financial Ratios ............................................................................................................................ 14 Audio ....................................................................................................................................................... 14 Topics ...................................................................................................................................................... 14 Initial Assessments .................................................................................................................................. 14 Entity Size ................................................................................................................................................ 16 Benefits and Limitations .............................................................................................................................. 18 Audio ....................................................................................................................................................... 18 Topics ...................................................................................................................................................... 18 Benefits ................................................................................................................................................... 18 Limitations ............................................................................................................................................... 19 Balance Sheet .......................................................................................................................................... 21 Income Statement ................................................................................................................................... 23 Industry Specific ...................................................................................................................................... 23 Users ........................................................................................................................................................... 24 Audio ....................................................................................................................................................... 24 Topics ...................................................................................................................................................... 24 Users of Financial Ratios .......................................................................................................................... 24 The Analyst .............................................................................................................................................. 25 3 www.AccountingPlay.com Financial Ratios & Analysis - Accounting Play Standard Financial Ratios by Category ........................................................................................................ 26 Audio ....................................................................................................................................................... 26 Topics ...................................................................................................................................................... 26 Introduction ............................................................................................................................................ 26 Liquidity ................................................................................................................................................... 26 Profitability .............................................................................................................................................. 26 Debt or Solvency ..................................................................................................................................... 27 Operating Performance ........................................................................................................................... 27 Cash Flow ................................................................................................................................................ 27 Valuation ................................................................................................................................................. 27 Industry Specific ...................................................................................................................................... 27 Summary ................................................................................................................................................. 27 Liquidity Ratios ............................................................................................................................................ 28 Audio ....................................................................................................................................................... 28 Topics ...................................................................................................................................................... 28 Introduction ............................................................................................................................................ 28 Current Ratio ........................................................................................................................................... 28 Quick Ratio .............................................................................................................................................. 30 Cash Ratio ................................................................................................................................................ 31 Times Interest Earned Ratio .................................................................................................................... 32 Profitability Ratios ....................................................................................................................................... 33 Audio ....................................................................................................................................................... 33 Topics ...................................................................................................................................................... 33 Introduction ............................................................................................................................................ 33 Profit Margin ........................................................................................................................................... 33 Gross Margin ........................................................................................................................................... 35 Effective Tax Rate .................................................................................................................................... 36 Return on Assets ..................................................................................................................................... 37 Return on Equity.....................................................................................................................................