Financial Ratio Analysis - List of Financial Ratios (2024)

FAQs

What are the 7 financial ratios? ›

The most common types of financial analysis are vertical analysis, horizontal analysis, leverage analysis, growth rates, profitability analysis, liquidity analysis, efficiency analysis, cash flow, rates of return, valuation analysis, scenario and sensitivity analysis, and variance analysis.

There are six basic ratios that are often used to pick stocks for investment portfolios. These include the working capital ratio, the quick ratio, earnings per share (EPS), price-earnings (P/E), debt-to-equity, and return on equity (ROE).

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.

Earnings per share (EPS)

Earnings per share, or EPS, is one of the most common ratios used in the financial world. This number tells you how much a company earns in profit for each outstanding share of stock. EPS is calculated by dividing a company's net income by the total number of shares outstanding.

What are the 5 components of financial analysis? ›

Watch this short video to quickly understand the twelve different types of financial analysis covered in this guide.

Ratio analysis is referred to as the study or analysis of the line items present in the financial statements of the company. It can be used to check various factors of a business such as profitability, liquidity, solvency and efficiency of the company or the business.

Financial ratios are grouped into the following categories: Liquidity ratios. Leverage ratios. Efficiency ratios.

Debt-to-Asset Ratio

Total Liabilities/Total Assets = $1074/3373 = 31.8%. 3 This means that 31.8% of the firm's assets are financed with debt. In 2021, the debt ratio is 27.8%. In 2021, the business is using more equity financing than debt financing to operate the company.

IAS 1 explains the general features of financial statements, such as fair presentation and compliance with IFRS, going concern, accrual basis of accounting, materiality and aggregation, offsetting, frequency of reporting, comparative information and consistency of presentation.

Income statement, Balance Sheet or Statement of financial position, Statement of cash flow, Noted (disclosure) to financial statements.

What are common ratios? ›

The common ratio is the amount between each number in a geometric sequence. It is called the common ratio because it is the same to each number or common, and it also is the ratio between two consecutive numbers i.e, a number divided by its previous number in the sequence.

The main solvency ratios are the debt-to-assets ratio, the interest coverage ratio, the equity ratio, and the debt-to-equity (D/E) ratio. These measures may be compared with liquidity ratios, which consider a firm's ability to meet short-term obligations rather than medium- to long-term ones.

“Ratio analysis is a study of relationship among various financial factors in a business.” Expression of ration: Ratios are expressed in following four ways: Pure Ratio Like 2:1. All liquidity and solvency ratios are expressed in pure form.

The three most commonly practised methods of financial analysis are – horizontal analysis, vertical analysis, and ratio and trend analysis.

Among the key financial ratios, investors and market analysts specifically use to evaluate companies in the retail banking industry are net interest margin, the loan-to-assets ratio, and the return-on-assets (ROA) ratio.

Financial ratios offer entrepreneurs a way to evaluate their company's performance and compare it other similar businesses in their industry. Ratios measure the relationship between two or more components of financial statements. They are used most effectively when results over several periods are compared.

Several techniques are commonly used as part of financial statement analysis. Three of the most important techniques are horizontal analysis, vertical analysis, and ratio analysis.

What are 6 types of financial models? ›

South Indian Bank has announced its Vision 2024, which will focus on 6Cs including capital, CASA, cost-to-income, competency building, customer focus, and compliance. Capital remains one of the most important pillars of this strategy and SIB aims to shore-up its capital base over the near term.

If you choose a 70 20 10 budget, you would allocate 70% of your monthly income to spending, 20% to saving, and 10% to giving. (Debt payoff may be included in or replace the “giving” category if that applies to you.) Let's break down how the 70-20-10 budget could work for your life.

The 10% rule encourages you to save at least 10% of your income before taxes and expenses. Calculating the 10% savings rule is a simple equation: divide your gross earnings by 10. The money you save can help build a retirement account, establish an emergency fund, or go toward a down payment on a mortgage.

An 80-10-10 mortgage is structured with two mortgages: the first being a fixed-rate loan at 80% of the home's cost; the second being 10% as a home equity loan; and the remaining 10% as a cash down payment.

Ratio analysis is referred to as the study or analysis of the line items present in the financial statements of the company. It can be used to check various factors of a business such as profitability, liquidity, solvency and efficiency of the company or the business.

The 50/30/20 rule is an easy budgeting method that can help you to manage your money effectively, simply and sustainably. The basic rule of thumb is to divide your monthly after-tax income into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt.

One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement.

Investing: 60/40 Portfolio

A 60%-40% split between stocks and bonds has long been considered a classic portfolio mix. The idea is that stocks provide growth and bonds provide some stability by zigging when stocks zag.

What is the 70/30 10 Rule money? ›

How the 70/20/10 Budget Rule Works. Following the 70/20/10 rule of budgeting, you separate your take-home pay into three buckets based on a specific percentage. Seventy percent of your income will go to monthly bills and everyday spending, 20% goes to saving and investing and 10% goes to debt repayment or donation.

The biggest chunk, 70%, goes towards living expenses while 20% goes towards repaying any debt, or to savings if all your debt is covered. The remaining 10% is your 'fun bucket', money set aside for the things you want after your essentials, debt and savings goals are taken care of.

The 20/10 rule follows the logic that not more than 20% of your yearly net income should be spent on consumer debt, and no more than 10% of your net monthly income should go towards paying the debt repayments. While a housing repayment might be considered a “debt”, it doesn't apply to this rule.

In order to maintain diversified management status, the 75-5-10 rule describes an industry acknowledged policy in which 75% of portfolio allocation has to be with different issuers (inclusive of cash); a cap of 5% of assets can be invested into a single company; and no more than 10% of any company's voting stock would ...

The Rule of 69 is used to estimate the amount of time it will take for an investment to double, assuming continuously compounded interest. The calculation is to divide 69 by the rate of return for an investment and then add 0.35 to the result.

The so-called Rule of 42 is one example of a philosophy that focuses on a large distribution of holdings, calling for a portfolio to include at least 42 choices while owning only a small amount of most of those choices.

What Are the Types of Ratio Analysis? Financial ratio analysis is often broken into five different types: profitability, solvency, liquidity, turnover, and earnings ratios.

There are five commonplace approaches to financial statement analysis: horizontal analysis, vertical analysis, ratio analysis, trend analysis and cost-volume profit analysis.