Financial Ratios

Financial Ratios

If you need to analyse a company, financial ratios would need to be an important part of your analysis. Here is a quick guide to some of the more commonly used financial ratio definitions and their uses! You can definitely improve your value investing skill right here.

Relative Valuation Metrics

P/E Ratio – Price-to-Earnings Ratio 

P/B Ratio – Price-to-Book Ratio

P/CF Ratio – Price-to-Cash Flow Ratio

EV/EBITDA – Enterprise Value to Earnings Before Interests, Taxes, Depreciation and Amortization 

Cap Rate – Net Property Income / Property Value

Profitability Metrics

ROE – Return on Equity

ROIC – Return on Invested Capital

GPM – Gross Profit Margin

OPM – Operating Profit Margin

NPM – Net Profit Margin

NIM – Net Interest Margin

Liquidity Metrics

Current Ratio – Current Assets / Current Liabilities

Quick Ratio – (Current Assets – Inventories) / Current Liabilities

Cash Ratio – (Cash and Cash Equivalents) / Current Liabilities

CCC – Cash Conversion Cycle

Solvency Metrics

EBITDA/Interest Expense – Earnings Before Interests, Taxes, Depreciation and Amortization to Interest Expense

Gearing Ratio – Total Borrowings / Total Shareholders’ Equity

Net Gear Ratio – (Total Borrowings – Cash and Cash equivalents)  / Total Shareholders’ Equity