Financial ratios explained! How does financial ratio analysis work? Let’s discuss ten of the most popular financial ratios that can help you find the story behind the numbers.
What do you need to get started on a financial ratio analysis? You need an income statement, the overview of how much profit a company made during a year. You also need a balance sheet, an overview of what a company owns and what a company owes at a specific point in time. We will start off with financial ratios that only focus on the income statement, then look at #financialratios that only focus on the balance sheet, and end with powerful financial ratios that combine information from the income statement and the balance sheet. Performing a financial ratio analysis has a scientific element to it (finding data and putting it into formulas), as well as an artistic element (assigning meaning to the outcome of the calculations, and seeing the big picture).
00:00 Introduction to financial ratio analysis
00:12 Income statement and balance sheet
00:45 Financial ratio analysis: an art and a science
01:02 Financial ratios on the income statement
01:39 Gross Profit % – Operating Margin % – Return On Sales %
02:29 Analyzing income statement financial ratios
03:35 Financial ratios on the balance sheet
04:01 Current ratio
04:40 Working capital
05:16 Debt-to-equity ratio
06:30 Financial ratios combining income statement and balance sheet
06:46 Return On Equity
07:26 Asset turnover ratio
08:00 Receivables turnover ratio
08:18 Days Sales Outstanding
08:38 Inventory turnover ratio
08:58 Financial ratio analysis summary
In this video on financial ratio analysis, we cover ten financial ratios:
On the income statement: gross profit %, operating margin %, return on sales %
On the balance sheet: current ratio, debt-to-equity, equity as % of total
When linking the P&L and the balance sheet: return on equity, asset turnover, receivables turnover, inventory turnover
Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In! .