Top 12 Financial Ratios to look at when analyzing annual report

Top 12 Financial Ratios to look at when analyzing annual report

.

Annual report is a very important communication of the Management with the shareholders. It not only gives the information on the past performance, but also gives information on the future direction of the company.

Analyzing the Financial statements from the annual report is an important element towards successful investing.

The following top 12 Financial Ratios give the overall performance of a company.

Of course, there are numerous ratios which have to be looked when doing a deeper analysis on a particular aspect of a company. However the following 12 ratios are good enough when scanning or to get an overview of the companies performance. 

Measures of Performance : Profitability (Gross Margin) %, Net Margin %, Capital Turnover, Stock Turnover & Working Capital Turnover

Financial Ratios, Annual Report, Measures of performance, Gross Margin, Net Margin, Profitability ratios,

Measures of Investments : Return on Equity, Earnings Per Share, Dividend cover, Dividend %, Book Value

Financial Ratios, EPS, ROE,  Annual Report, Measures of Investment, Debt Equity Ratio, Net Margin, Profitability ratios,

Measures of Financial Status: Debt Equity Ratio, Current Ratio, Fixed Asset times Shareholders Funds

Financial Ratios, Annual Report, Measures of Financial Performance, Current Ratio, Debt Equity, Profitability ratios,

Happy Analysis.

Share this post

Comments (2)

  • Anirban Datta

    Thanks Kapil,
    Could you please also provide the values of these parameters which is considered as good performance for a company.

    July 20, 2012 at 10:58 PM
  • Kapil

    These will vary from industry, sector and company. However there the benchmarks typically are :
    Book Value ~ 2.5 times (lower the is better) , P/E ~ 15 times (lower is better) , Growth Rate ~ 8% (higher is better) , Debt Equity ratio > 2 should be avoided. A good dividend payout is typically 20% of profits. ROCE ~ 20% ( higher is better)

    July 25, 2012 at 4:47 PM

Leave a Reply

Your email address will not be published.