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 companys financial statements balance sheet
A firm’s performance can be evaluated using financial ratios. Referencing these ratios to those of other firms allows a comparison to be made. The following is a listing of some useful ratios. Gross Margin = Gross Profit / Sales.
For example, companies such as Burger King will have a ratio as high as 1.5, while companies such as Wal-Mart as low as 0.3. On the Balance Sheet (BS) the items are listed from the most liquid ( cash) to the least liquid (inventories and prepaid expenses). Financial ratios mbaFinancial ratios are commonly used to evaluate a business, but they can also be used to assess a person’s financial health. They can tell you how well a company is doing financially, or how healthy a person is financially. Financial ratios can be compared against industry norms, and compared to other people in a related field. Many people think that they have a good sense of what their financial situation is like, but financial ratios can give you a better sense of where you are financially.
