Accounting Ratios
Accounting Ratios Accounting ratios, also known as financial ratios, are quantitative measures used to evaluate the financial performance, efficiency, and stability of a company. They are derived from the financial statements and provide insights into various aspects of a company's operations. Here are some examples of commonly used accounting ratios: 1. Liquidity Ratios: - Current Ratio: Current Assets / Current Liabilities - Quick Ratio: (Current Assets - Inventory) / Current Liabilities - Cash Ratio: Cash and Cash Equivalents / Current Liabilities These ratios assess a company's ability to meet short-term obligations. 2. Profitability Ratios: - Gross Profit Margin: (Gross Profit / Net Sales) * 100 - Net Profit Margin: (Net Profit / Net Sales) * 100 - Return on Equity (ROE): (Net Income / Shareholders' Equity) * 100 These ratios measure the company's abili...