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Financial Ratios
Profitability Ratios Profitability Ratios measure how well a business is doing in making money. They help us understand if the company is making more money than it is spending or if it’s facing financial challenges. These ratios tell us if the company’s business is going in a good direction or not.

 

Net Profit Margin (Earnings Before Tax):	The net profit margin ratio is a key financial metric used to evaluate a company’s profitability. It represents the percentage of revenue that remains as profit after all expenses, including taxes and interest have been deducted.
Return on Capital Employed:	The return on capital employed ratio is a financial metric used to evaluate a company’s efficiency in generating profits from its capital employed. It measures how efficiently a company uses its capital to generate earnings before interest and taxes (EBIT). It provides insights into how well a company uses its capital to generate earnings.
Shareholders’ Equity:	The shareholders’ equity ratio is a financial metric used to measure the proportion of a company’s total assets that are financed by shareholders’ equity. This ratio is important for assessing the financial stability and leverage of a company. It helps understand the extent to which a company is financing its assets through equity rather than debt.
Return on Net Assets:	The return on net assets ratio is a financial metric used to assess a company’s efficiency in generating profit from its net assets. It measures how effectively a company is using its net assets (total assets minus current liabilities) to produce earnings before interest and taxes (EBIT). It is particularly valuable for comparing companies within the same industry and monitoring performance trends over time.
Return on Equity:	The return on equity ratio is a key financial metric used to evaluate a company’s ability to generate profits from its shareholders’ equity. It measures how effectively management is using the company’s assets to create profits and is a crucial indicator of financial performance and operational efficiency. It indicates how well a company is using its equity to generate profit, ROE serves as a key indicator of overall financial performance.

Net Assets to Turnover:

The net assets to turnover ratio is a financial metric used to measure the efficiency with which a company uses its net assets to generate revenue. It indicates how effectively a company is utilising its assets to produce sales and is a key indicator of operational efficiency. It indicates how well a company leverages its net assets to produce sales.

Operating Profit:

The operating profit margin is a financial metric that measures the proportion of a company’s revenue that remains after deducting operating expenses. It provides insight into the efficiency of a company’s core business activities and its ability to generate profit from operations. It is especially useful for comparing companies within the same industry and monitoring performance trends over time.

 

Growth Rate %

Growth Rate % is a measurement that tells us how much the company has increased in value compared to the previous year. The red and green arrows show positive or negative direction on the previous year. These ratios give us a sense of how well the company can handle challenges and uncertainties.

 

Stability Ratios

Stability Ratios are like a health check for a company’s finances. They help us see if the company is strong and stable or if it might be having some financial issues. These ratios give us a sense of how well the company can handle challenges and uncertainties.

Fixed Assets:	The fixed assets turnover ratio is a financial metric that measures how effectively a company is utilising its fixed assets to generate revenue. This ratio provides insights into the efficiency of a company’s use of its property, plant and equipment (PPE) to generate revenue.#
Asset Turnover Ratio:	The asset turnover ratio is a financial metric that measures how efficiently a company uses its total assets to generate revenue. This ratio provides insights into a company’s operation efficiency and effectiveness in utilising its assets to produce sales. This ratio is particularly useful for comparing companies within the same sector and monitoring performance trends over time.
Current Assets to Fixed Assets:	The current assets tot fixed assets ratio is a financial metric that measures the proportion of a company’s assets that are liquid (current assets) relative to its long-term investments (fixed assets). This ratio provides insights into the company’s liquidity, operational efficiency and asset structure. This ratio is particularly useful for comparing companies within the same sector and monitoring changes in a company’s asset management strategy over time.

 

Liquidity Ratios

Liquidity Ratios are like a company’s savings account check. They show if the company has enough money to cover its short-term bills and payments. These ratios help us to know if the company can quickly use its money to handle its immediate needs without any trouble.

Current Ratio	The current ratio is a financial metric that assesses a company’s ability to pay off its short-term liabilities with its short-term assets. The ratio is an important indicator of a company’s liquidity and financial health. By comparing the current ratio’s historical trends, stakeholders can make informed decisions about the company’s financial stability and operational efficiency.
Acid Test Ratio:	The acid test ratio is a financial metric used to evaluate a company’s short-term liquidity position. It measures the company’s ability to pay off its current liabilities using only its most liquid assets, excluding inventory. The acid test ratio provides a more conservative assessment of liquidity compared to the current ratio. It helps to understand the company’s ability to meet its immediate obligations using its most liquid assets.
Cash Ratio:	The cash ratio is a financial metric that measures a company’s ability to cover its short-term liabilities using only its cash and cash equivalents. It provides a conservative assessment of liquidity by focusing solely on the most liquid assets. By comparing the cash ratio with historical trends, stakeholders can make informed decisions about the company’s financial stability and operational efficiency.
Net Working Capital as % of Sales:	The net working capital as a percentage of sales ratio is a financial metric used to assess the efficiency of a company in managing its working capital relative to its sales revenue. It measures the proportion of working capital required to support a given level of sales. By monitoring changes in the ratio over time and comparing with industry benchmarks, stakeholders can gain insights into the company’s operational efficiency, financial health, and competitive position.

 

Turnover Ratios

Turnover Ratios look at how quickly a company is using its goods, like inventory.

Capital Turnover Ratio

The capital turnover ratio is a financial metric used to assess how efficiently a company utilises its capital to generate revenue. It measures the company’s ability to generate sales relative to the amount of capital invested in the business. By monitoring changes in the ratio over time and comparing it with industry benchmarks, stakeholders can gain insights into the company’s operational efficiency, financial health, and competitive position.

 

Leverage Ratios

Leverage Ratios check how much a company is relying on borrowed money. They help us understand if the company has taken a lot of loans or debts to run its business. These ratios show whether the company is using more of its own money or if it’s depending heavily on borrowed funds.

Debt	The debt ratio is a financial metric that measures the proportion of a company’s total liabilities to its total assets. It is a fundamental indicator used to assess the financial leverage and overall risk level of a company.
Debt-to-Equity	The debt-to-equity ratio is a key financial metric that compares a company’s total liabilities to its shareholders equity. It is widely used to evaluate the level of financial leverage a company is utilising.

 

Financial Risk Ratios

Financial Risk Ratios are a way to see how safe a company’s money situation is. They help us understand if the company might face money problems in the future. These ratios tell us if the company could have trouble paying its debts or if it’s in a good position to handle financial challenges.

Debt Equity

The debt ratio is a financial metric that measures the proportion of a company’s assets that are financed by debt. It provides insights into the company’s financial leverage and risk level. Comparing the debt ratio with industry benchmarks and monitoring its changes over time helps stakeholders make informed decisions about the company’s financial health and strategic direction.