Using ratios to analyse companies

Introduction| Course| Q&As | Recommended reading| Quiz |

Introduction

Context

The workshop focuses on specific ratios and does not consider the interpretation of a set of accounts generally. We recommend that after this tutorial you also take the 'Interpreting Company Reports and Accounts' tutorial which looks at the 'soft' signals from a set of accounts.

Prior knowledge required

You need a reasonably enquiring mind and a positive approach to numbers. You might need to have a calculator to hand.

Contents

1. Why bother with ratios?
2. A word of warning
3. The P&L and the balance sheet
4. Grouping the ratios
5. Profit margin
6. Return on capital employed (ROCE)
7. Sales as a multiple of capital employed
8. Stockturn
9. Debt collection
10. Payment of trade creditors
11. Cash-to-cash cycle
12. Gearing
13. Interest cover
14. Current ratio
15. Quick ratio (acid test)
16. Earnings ratios
17. Dividend ratios
18. Other ratios
19. Sources of information
20. Conclusion

Web www.incademy.com