Here is a thread of TEN ratios to know when looking at financial statements!
Knowing these will make you a more intelligent investor! 😊📈 #FinancialFreedom #financeTips
Knowing these will make you a more intelligent investor! 😊📈 #FinancialFreedom #financeTips
Return on Assets (ROA) 🏬
Gives us a good description of how a companies net income compares to its total assets.
Equation: Net income / Total Assets
Gives us a good description of how a companies net income compares to its total assets.
Equation: Net income / Total Assets
Gross Margin Ratio 💲
A profitability ratio that shows how a company is efficiently utilizing its assets to produce more profit.
(Total Revenue - COGS) / Total Revenue
A profitability ratio that shows how a company is efficiently utilizing its assets to produce more profit.
(Total Revenue - COGS) / Total Revenue
Inventory Turnover 📦
Show the number of times that a company sells and replaces inventory over time.
Net Sales / AVG. Inventory at Selling Price
Show the number of times that a company sells and replaces inventory over time.
Net Sales / AVG. Inventory at Selling Price
Days’ Sales In Inventory 📆
Shows the amount of time the product has spent in inventory.
(AVG Inventory / COGS) * 365
Shows the amount of time the product has spent in inventory.
(AVG Inventory / COGS) * 365
Accounts Receivable Turnover Ratio 📶
Describes how effective a company is at receiving their credit payments.
Net Credit Sales / AVG Accounts Receivable
Describes how effective a company is at receiving their credit payments.
Net Credit Sales / AVG Accounts Receivable
Days Sales Uncollected 💧
Shows short term liquidity that measures the number of days before accounts receivables are then collected.
(AVG Account Receivable / Net Credit Sales) * 365
Shows short term liquidity that measures the number of days before accounts receivables are then collected.
(AVG Account Receivable / Net Credit Sales) * 365
Current Ratio 📐
Measures short term liquidity and how a company can deal with it.
Current Assets / Current Liabilities
Measures short term liquidity and how a company can deal with it.
Current Assets / Current Liabilities
Acid-Test or Quick Ratio 🧬⌛️
Measures the ability of how fast a company uses its cash to pay off debts.
(Current Assets - Inventory) / Current Liabilities
Measures the ability of how fast a company uses its cash to pay off debts.
(Current Assets - Inventory) / Current Liabilities
Debt-Ratio 💸
Shows the portion of a company's assets that are funded by liabilities or debts.
Total liabilities / Total assets
Shows the portion of a company's assets that are funded by liabilities or debts.
Total liabilities / Total assets
Debt to Equity Ratio 📊
A measure of the degree to which a company is financing its operations through debt versus wholly-owned funds.
Total Liabilities / Total Shareholder Equity
A measure of the degree to which a company is financing its operations through debt versus wholly-owned funds.
Total Liabilities / Total Shareholder Equity
I hope you found these helpful! Let me know what you would like to learn and what other ratios you find useful! 📈📊
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