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What are Financial Ratios? Financial ratios are created with the use of numerical values taken from financial statements to gain meaningful information about a company.
- Liquidity Ratios. Liquidity ratios measure the company’s ability to meet current liabilities Current Liabilities Current Liabilities are the payables which are likely to settled within twelve months of reporting.
- Leverage Ratios. Under these types of financial ratios, how much a company depends on its borrowing for its operations. Hence it is important for bankers and investors who wish to invest in the company.
- Efficiency / Activity Ratios. Under these types of financial ratios, Activity ratios show how a company utilizes its assets. Inventory Turnover Ratio
- Profitability Ratios. Most used indicators to determine the success of the firm. The higher the profitability ratio, the better the company is compared to other companies with a lower profitability ratio.
Jul 26, 2024 · Ratio analysis is a method of analyzing a company's liquidity, operational efficiency, and profitability by comparing line items on its financial statements.
Jan 1, 2024 · Financial ratios are mathematical calculations used to analyze a company’s financial statements. Financial ratios provide insights into performance by comparing values over time and against industry benchmarks.
calculate earnings per share (EPS) and price earnings (PE) ratio with data provided. explain the meaning and usefulness of an EPS figure and a PE ratio. calculate return on equity (ROE) with data provided. explain the meaning and usefulness of a calculated ROE figure.
May 4, 2023 · Profitability ratios determine a company's financial performance by analyzing its ability to generate profits relative to its sales, assets, or equity. These ratios help stakeholders evaluate the effectiveness of management and the company's overall profitability.
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This article will focus on measures of financial performance and will detail the skills and knowledge expected from candidates in the FMA/MA exam. FMA/MA candidates are expected to be able to calculate key accounting ratios, to know what they measure, and to explain what particular values mean.
