Coverage Ratios

By: Shaun     From: Coverage ratios are comparisons designed to measure a company’s ability to pay its liabilities. On the surface, coverage ratios might sound a lot like liquidity and solvency ratios, but there is a distinct difference. Coverage ratios analyze a company’s ability to service its debt and other obligations. In other words, these ratios […]

Market Prospect Ratios

By: Shaun     From: Market Prospect ratios are used to compare publicly traded companies’ stock prices with other financial measures like earnings and dividend rates. Investors use market prospect ratios to analyze stock price trends and help figure out a stock’s current and future market value. In other words, market prospect ratios show investors what they […]

Profitability Ratios

By: Shaun     From: Profitability ratios compare income statement accounts and categories to show a company’s ability to generate profits from its operations. Profitability ratios focus on a company’s return on investment in inventory and other assets. These ratios basically show how well companies can achieve profits from their operations. Investors and creditors can use profitability […]

Efficiency Ratios

By: Shaun     From: Efficiency ratios also called activity ratios measure how well companies utilize their assets to generate income. Efficiency ratios often look at the time it takes companies to collect cash from customer or the time it takes companies to convert inventory into cash—in other words, make sales. These ratios are used by management […]

Solvency Ratios

By: Shaun     From: Solvency ratios, also called leverage ratios, measure a company’s ability to sustain operations indefinitely by comparing debt levels with equity, assets, and earnings. In other words, solvency ratios identify going concern issues and a firm’s ability to pay its bills in the long term. Many people confuse solvency ratios with liquidity ratios. […]

Liquidity Ratios

By: Shaun     From: Liquidity ratios analyze the ability of a company to pay off both its current liabilities as they become due as well as their long-term liabilities as they become current. In other words, these ratios show the cash levels of a company and the ability to turn other assets into cash to pay […]