In finance, a financial ratio is a ratio of selected values on a enterprise’s financial statements.
There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization, which any good financial modeler should be aware of when conducting a financial modeling exercise.
Financial ratios are used by managers within a firm, by current and potential stockholders (owners) of a firm, and by a firm’s creditors.
Security analysts use financial ratios to compare the strengths and weaknesses in various companies.
This video provides a primer into the 3 main classes of financial ratios, namely liquidity ratios, solvency ratios and profitability ratios.
When you have finished watching the video, be sure to put your new found financial analysis knowledge to practise by downloading this excellent financial ratio analysis template available in the Finance 3.0 forums, that allows you to calculate, analyze and compare a set of business & financial ratios to assess & measure the operating performance of your own business or businesses / stocks that you intend to invest in.
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