Financial Ratios

Financial ratios or financial ratio analysis is a tool for assessing a company's financial performance based on comparisons of a company's financial data contained in the heading of financial statements (balance sheets, statements of income / loss, cash flow statements). The ratio describes the relationship or balance between the (mathematical relationship) between a certain amount by the number of others.

Ratio analysis can be used to guide investors and creditors to make decisions or consideration of the company's achievements and prospects in the future. One way of processing and interpreting accounting information, which is expressed in relative and absolute terms to describe a particular relationship between the number one with another number of a financial report.

Financial ratio analysis using financial reporting data that already exist as a basis for assessment. Although based on the data and conditions of the past, financial ratio analysis is intended to assess the risks and opportunities in the future. Measurements and relationships of the post with another post in the financial statements which appear in the financial ratios can provide meaningful conclusions in determining the level of financial health of a company. But if only for one ratio means it is not enough, so the analysis must be done also rivalries that are faced by corporate management in the wider industry, and combined with qualitative analysis of business and manufacturing industry, qualitative analysis, as well as industrial research .

Types of Financial Ratios

In general, financial ratios can be classified as follows:

1. Liquidity ratio. This ratio is used to measure the ability of the company in ensuring smooth obligations. This ratio include cash ratio (cash ratio), ratio Quick (quick ratio) Current Ratio (current ratio)
2. Ratio lever / leverage. This ratio is used to measure the level of funding the management of the company. Some of these ratios include the ratio of Total Debt to Capital itself, Total Debt to Total Assets, TIE Times Interest Earned.
3. Efficiency ratio / rotation. Turnover ratio is used to measure the company's ability to manage asset-assetnya providing cash flow for the company's entry. These ratios include Inventory Turnover Ratio, Fixed Assets Turnover, and Total Asset Turnover.
4. Profitability ratios. The ratio used to measure the ability of the company in generating profits for the company. These ratios include: GPM (Gross Profit Margin), OPM (Operating Profit Margin), NPM (Net Profit Margin), ROA (Return to Total Assets), ROE (Return On Equity).
5. Market Value Ratios. Which measures the ratio of market price relative to book value of the company. These ratios include: PER (Price Earning Ratio), Devidend Yield, Payout Ratio Devideng, PBV (Price to Book Value)