{"id":109416,"date":"2023-04-03t11:55:23","date_gmt":"2023-04-03t15:55:23","guid":{"rendered":"\/\/www.g005e.com\/?p=109416"},"modified":"2024-08-07t23:09:29","modified_gmt":"2024-08-08t03:09:29","slug":"the-top-11-financial-statement-ratios","status":"publish","type":"post","link":"\/\/www.g005e.com\/2023\/04\/03\/the-top-11-financial-statement-ratios\/","title":{"rendered":"the top 11 financial statement ratios"},"content":{"rendered":"

\"businesswoman<\/a>and why the quick ratio isn\u2019t valid.
\n<\/strong><\/p>\n

by ed mendlowitz<\/i>
\n
77 ways to wow!<\/i><\/a><\/p>\n

ratios are tools used to evaluate a company\u2019s financial statements.<\/p>\n

more: <\/b>insurance you might not know you need<\/a> | price not always the top consideration in a sale<\/a> | when an owner dies without a buy-sell agreement<\/a> | due diligence is in the details<\/a> | manage better with the right financial tools<\/a> | do you need a forensic professional?<\/a>
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here are some of the more commonly used ratios.<\/p>\n

1. working capital ratio<\/strong><\/p>\n

current assets \u00f7 current liabilities
\n<\/p>\n

illustration: current assets of $2,500,000 \u00f7 current liabilities of $1,250,000 = 2<\/p>\n

this is also called the current ratio. its purpose is to determine how the business can handle its daily operations. a number greater than 1 is good, with the greater the number the better. less than 1 indicates an \u201cinsolvent\u201d company and one that needs to be watched closely. the current assets include assets likely to be converted into cash within the next year, while current liabilities are due to be paid within the next year.<\/p>\n

2. debt to equity<\/strong><\/p>\n

total debt \u00f7 stockholders\u2019 equity or capita<\/p>\n

i prefer the long-term debt to equity ratio. see next ratio.<\/p>\n

3. long-term debt to equity<\/strong><\/p>\n

long-term debt \u00f7 stockholders\u2019 equity<\/p>\n

illustration: ltd of $9,000,000 \u00f7 s\/h equity of $6,000,000 = 1.5<\/p>\n

the purpose is to determine how leveraged the company is. the greater the long-term debt in relation to equity,<\/p>\n