Introduction to financial ratios
What are financial ratios?
Financial ratios are indicators of a company’s or industry’s performance. Comparing financial ratios at the company and industry level allows companies themselves to evaluate their own performance against peers and external parties to evaluate financial health from a risk perspective. Ratios can be used to benchmark present against past performance but also as a predictor of likely future performance.
Investopedia defines ratios analysis as “a quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by studying its financial statements such as the balance sheet and income statement.”
Some examples of popular ratios are:
Profitability – with ratios related to profit margins, return on assets and more.
Liquidity – including working capital, quick ratio, and more
Efficiency – including inventory turnover, turnover ratio and more
Financial ratios and industry codes
Industry codes
Familiarity with industry codes can help you find financial ratios. Industry codes are numerical systems used to classify companies, organizations and traders into groupings based on how they operate.
The most popular classifications used in North America are NAICS and SIC codes. Some publishers may also create their own classification. Please note that not all resources allow searching by industry codes.
NAICS codes North American Industry Classification System
NAICS is a 2- through 6-digit hierarchical classification system. Each digit in the code is part of a series of progressively narrower categories. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry.
This standard is used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. NAICS is an industry classification system, not a product classification system.
US Census Bureau NAICS Codes & Understanding Industry Classification Systems
SIC codes - Standard Industrial Classification
SIC codes are four-digit numerical codes assigned by the U.S. government to business establishments to identify the primary business of the establishment.
US Department of Labor SIC Manual – includes short descriptions and examples of main products or services. SIC search – allows you to quickly identify relevant codes by performing keyword searches.
SIC is gradually being replaced by NAICS but many resources allow searching by both.
Books
Business Ratios and Formulas by
A complete appraisal of analytical tools available to managers to assess performance Required reading for anyone starting, running, or growing a business, Business Ratios and Formulas, Third Edition puts answers at the fingertips of business managers, with nearly 250 operational criteria and clear, easy-to-understand explanations that can be used right away. The Third Edition includes twenty new measurements. Approximately 20 new measurements Offers a comprehensive resource of nearly 250 operational criteria An Appendix including a dictionary of accounting and finance terms A thorough list of every ratio and formula, and how to compile and interpret that information Also by Steven M. Bragg: Fast Close: A Guide to Closing the Books Quickly, Second Edition An ideal tool for measuring corporate performance, this authoritative resource allows you to pick and choose the tools you need to best assess your organization's performance.
ISBN: 9781118226834Publication Date: 2012-02-23
Financial Ratios by
Financial ratios are an important technique of the financial analysis of a business organization. Effective financial management is the key to running a financially successful business. Ratio analysis is critical for helping you understand financial statements, for identifying trends over time, and for measuring the overall financial health of your business. Lenders and potential investors often rely on ratio analysis for making lending and investing decisions. This book aims to not only develop an understanding of the concepts of financial ratios but also to provide the students a practical insight into the application of financial ratios for decision making and control. It analyzes the financial statements of corporate enterprises in India in diverse sectors with the help of financial ratios in order to facilitate the learning process.
ISBN: 9781631573606Publication Date: 2015-12-24
Financial Ratios for Executives by
Financial Ratios for Executives is written specifically with today's global executive in mind. It makes financial ratios easy to understand and use effectively. This short book will prove invaluable to both financial and non-financial executives looking for easy, intuitive methods to assess corporate health and assist in strategic decision making. Financial Ratios for Executives contains over 100 financial ratios and other useful calculations. It includes ratios that are commonly used, such as return on investment (ROI), return on assets (ROA), return on equity (ROE), economic value added (EVA), and debt-to-equity ratio, just to name a few. It also includes many less-well known--yet powerful--ratios that can provide unparalleled insight into operations, financial management, sales and marketing efforts, and overall performance, among other areas. Using realistic financial and operational data from two fictional companies, the explanation of each ratio includes: Type of ratio Formula for calculating the ratio Description of the ratio Example based on ABC Company or XYZ Company Additional comments or insights In addition to the section on financial ratios, financial experts Michael Rist and Albert Pizzica have included a section on capital budgeting, an understanding of which is essential for both the financial and non-financial executives before they take part in an annual budget meeting or any other business meeting where capital allocation is discussed. It includes the most important tools of finance, such as net present value (NPV), internal rate of return (IRR), payback method, and total cost of ownership. Who gets ahead in the business world? Those who understand the numbers. It's as simple as that. Financial Ratios for Executives is for those who want to understand how to use financial data to support their initiatives, solve persistent problems, uncover opportunities, bolster company health, and shine in corporate meetings.
ISBN: 9781484207321Publication Date: 2014-11-24
Key management ratios: The 100+ ratios every manager needs to know by
Business ratios are the figures that provide management with targets and standards for their organisation. From earnings per share and cash flow to return on investment and sales to fixed assets ratios, this book guides managers through the key ratios at the heart of business practice.
ISBN: 9780273719977Publication Date: 2012
Please note some of these books might be reference books; reference books are only available for use in the library. You can identify those by looking at the Copies tab in the record of each book – the Location section should say Sherman Library Reference and the Status section should say LIB USE ONLY.
Analysis of Financial Statements by
The fully update Third Edition of the most trusted book on financial statement analysis Recent financial events have taught us to take a more critical look at the financial disclosures provides by companies. In the Third Edition of Analysis of Financial Statements, Pamela Peterson-Drake and Frank Fabozzi once again team up to provide a practical guide to understanding and interpreting financial statements. Written to reflect current market conditions, this reliable resource will help analysts and investors use these disclosures to assess a company's financial health and risks. Throughout Analysis of Financial Statements, Third Edition, the authors demonstrate the nuts and bolts of financial analysis by applying the techniques to actual companies. Along the way, they tackle the changing complexities in the area of financial statement analysis and provide an up-to-date perspective of new acts of legislation and events that have shaped the field. Addresses changes to U.S. and international accounting standards, as well as innovations in the areas of credit risk models and factor models Includes examples, guidance, and an incorporation of information pertaining to recent events in the accounting/analysis community Covers issues of transparency, cash flow, income reporting, and much more Whether evaluating a company's financial information or figuring valuation for M&A's, analyzing financial statements is essential for both professional investors and corporate finance executives. The Third Edition of Analysis of Financial Statements contains valuable insights that can help you excel at this endeavor.
ISBN: 9781118331910Publication Date: 2012-10-01
How to Read a Financial Report by
An updated new edition of the comprehensive guide to reading and understanding financial reports Financial reports provide vital information to investors, lenders, and managers. Yet, the financial statements in a financial report seem to be written in a foreign language that only accountants can understand. This new Eighth Edition of How to Read a Financial Report breaks through that language barrier, clears away the fog, and offers a plain-English user's guide to financial reports. This updated edition features new information on the move toward separate financial and accounting reporting standards for private companies, the emergence of websites offering financial information, pending changes in the auditor's report language and what this means to investors, and requirements for XBRL tagging in reporting to the SEC, among other topics. Makes it easy to understand what financial reports really say Updated to include the latest information financial reporting standards and regulatory changes Written by an author team with a combined 50-plus years of experience in financial accounting With this new edition of How to Read a Financial Report, investors will find everything they need to fully understand the profit, cash flow, and financial condition of any business.
ISBN: 9781118735589Publication Date: 2013-12-13
Interpreting and Analyzing Financial Statements by
For Introductory Financial Accounting courses. Designed for use with Harrison and Horngrens Financial Accounting, 4th Edition or any financial accounting text. This activity workbook helps students analyze real company financial statement information and helps prepare students for a capstone project creating a comprehensive financial statement analysis. Each activity concentrates on only one aspect of the analysis and uses data from well-known corporations to pique students interest and add relevancy. *NEW - New financial statements and data from companies currently in the news such as Pfizer, Microsoft, Wal-Mart, America Online, Disney and more. *NEW - Reorganized and expanded chapters and activities. *NEW - More comprehensive activities related to income statements, balance sheets and statement of cash flows. *Focus on interpretation and analysis. *Over 90 activities employ written exercises, Internet activities and other research exercises. *Emphasizes the significant role ratios have in analyzing financial statements. *Corporate Analysis, final project in four-parts.
ISBN: 0130183768Publication Date: 2000-09-19
Reading Financial Reports for Dummies by
Your personal roadmap to becoming fluent in financial reports At first glance, the data in financial reports might seem confusing or overwhelming. But, with the right guide at your side, you can learn to translate even the thickest and most complex financial reports into plain English. In Reading Financial Reports For Dummies, you'll move step-by-step through each phase of interpreting and understanding the data in a financial report, learning the key accounting and business fundamentals as you go. The book includes clear explanations of basic and advanced topics in finance, from the difference between private and public companies to cash flow analysis. In this book, you'll also find: Full coverage of how to analyze annual reports, including their balance sheets, income statements, statements of cash flow, and consolidated statements Real-world case studies and financial statement examples from companies like Mattel and Hasbro Strategies for analyzing financial reports to reveal opportunities for operations optimization Reading Financial Reports For Dummies is a can't-miss resource for early-career investors, traders, brokers, and business leaders looking to improve their financial literacy with a reliable, accurate, and easy-to-follow financial handbook.
ISBN: 9781119871361Publication Date: 2022-04-05
The Story Underlying the Numbers by
When faced with financial statements of a firm, very often students and even practitioners are seen to be at a loss where to begin with analysis. Most simply compute every ratio they know and interpret them in a standalone manner. They are unable to thread them together to spin a meaningful story that can completely or at least substantially explain what might be happening at the firm. Decision making of any kind based on such a piecemeal approach will remain flawed. This book uses a logical, top-down approach to unraveling the underlying story of the firm. It can be used by students and working executives who have a rudimentary prior idea of financial statements as well as familiarity with the very basic financial ratios. It is a myth that only executives in the finance function need to understand financial statements. Every decision within a firm has implications for the financial statements, and the need for such knowledge increases as one goes up the corporate ladder. The book is intended to be free flowing, with minimum jargon so as to be understood and appreciated especially by non-finance executives and students of business and management.
ISBN: 9781947843776Publication Date: 2018-06-04
Warren Buffett and the Interpretation of Financial Statements by
With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple, easy-to-follow guide for reading financial statements from Warren Buffett's successful perspective. Buffett and Clark clearly outline Warren Buffett's strategies in a way that will appeal to newcomers and seasoned Buffettologists alike. Inspired by the seminal work of Buffett's mentor, Benjamin Graham (The Interpretation of Financial Statements, 1937), this book presents Buffett's interpretation of financial statements with anecdotes and quotes from the master investor himself. Potential investors will discover: -Buffett's time-tested dos and don'ts for interpreting an income statement and balance sheet -Why high research and development costs can kill a great business -How much debt Buffett thinks a company can carry before it becomes too dangerous to touch -The financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage--which he believes makes for the winning long-term investment -How Buffett uses financial statements to value a company -What kinds of companies Warren stays away from no matter how cheap their selling price Once readers complete and master Buffett's simple financial calculations and methods for interpreting a company's financial statement, they'll be well on their way to identifying which companies are going to be tomorrow's winners--and which will be the losers they should avoid at all costs. Destined to become a classic in the world of investment books, Warren Buffett and the Interpretation of Financial Statements is the perfect companion volume to The New Buffettology and The Tao of Warren Buffett.
ISBN: 9781416573180Publication Date: 2008-10-14
Please note some of these books might be reference books; reference books are only available for use in the library. You can identify those by looking at the Copies tab in the record of each book – the Location section should say Sherman Library Reference and the Status section should say LIB USE ONLY.