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1 Liquidity Measurement Ratios.
Liquidity ratios attempt to measure a
company's ability to pay off its short-term debt obligations. This is
done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.
done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.
2 Profitability Indicator Ratios
Profitability Indicator Ratios, give users a good understanding
of how well the company utilized its resources in generating profit and
shareholder value.
3 Debt Ratios.
Debt Ratios ratios give users a
general idea of the company's overall debt load as well as its mix of
equity and debt. Debt ratios can be used to determine the overall level of
financial risk a company and its shareholders face. In general, the greater the
amount of debt held by a company the greater the financial risk of
bankruptcy.
4 Operating Performance Ratios
Operating Performance Ratios is a rough measure of the
productivity of a company's fixed assets (property, plant and equipment or
PP&E) with respect to generating sales. For most companies, their
investment in fixed assets represents the single largest component of their
total assets. This annual turnover ratio is designed to reflect acompany's
efficiency in managing these significant assets. Simply put, thehigher the
yearly turnover rate, the better.
5 Cash Flow Indicator Ratios
The ratios in this section use cash flow compared to other company
metrics to determine how much cash they are generating from their sales,
the amount of cash they are generating free and clear, and the amount of cash
they have to cover obligations.
6 Investment Valuation Ratios
Investment
Valuation Ratios compares a stock's per-share
price (market value) to its book value (shareholders' equity). The price-to-book
value ratio, expressed as a multiple (i.e. how many times a company's stock is
trading per share compared to the company's book value per share), is an
indication of how much shareholders are paying for the net assets of a
company.
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