Financial Ratio

In: Business and Management

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Financial Ratios & Other Financial Analysis Tools
Here is a list of many ratios used to analyze a company's financial condition - along with an explanation of why they are considered to be important.

Liquidity Ratios * Current Ratio * Acid Test Ratio * Average Collection Period
Coverage Ratios * Times Interest Earned * Net Income + Non-cash Exp /
Current Portion of LT Debt
Leverage Ratios * Fixed Assets / Tangible Net Worth * Debt to Tangible Net Worth | Operating Ratios and Indicators * Gross Profit Margin * EBT / Tangible Net Worth * EBT / Total Assets * Fixed Asset Turnover Ratio * Total Asset Turnover Ratio * E.B.I.T.D.A. ("Ebitda")
Expense to Revenue Ratios * % Depreciation, Depletion & Amortization / Revenue * Officers' &/or Owner's Compensation / Revenue
Ratio Fusion! * Altman's Z-Score for Privately Held Firms |

Banks often use ratios in loan contracts with benchmarked minimums or maximums (aka 'Covenants').
Even if covenants are not listed in your loan contract, banks still look at them.
You will add credibility to your financial statements if you include financial ratios and indicators in your presentation to the bank. They will think you use these indicators internally, and they'll love you for it!
Actually; If you're not using Financial Analysis Tools and Benchmarks internally, you should strongly consider it.

LIQUIDITY RATIOS
Liquidity ratios indicate the company’s ability to meet its short term obligations. * The Current Ratio is calculated by dividing current assets by current liabilities. If current assets are greater than current liabilities, the current ratio will be greater than 1.0. * The Acid Test Ratio compares Current Liabilities to Current Assets that can be quickly converted to cash. Here is an example of a formula…...

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