A Beginners Guide to Financial Ratio Analysis

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Last updated on June 5, 2024 8:21 pm

Learn how to analyze a company’s financial performance using ratios. This course covers activity, liquidity, solvency, profitability, and valuation ratios. You’ll also learn how to interpret the results, compare companies, and suggest remedial actions. Suitable for finance and accounting professionals, as well as those interested in stock investment decisions.

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What you’ll learn

  • Compute a complete set of activity, liquidity, solvency, profitability, and valuation ratios ratios to analyze a company
  • Perform a Dupont analysis, equity analysis, segment analysis and credit analysis for a company
  • Interpret the results of a complete ratios analysis
  • Compare a company’s performance to another company
  • Interpret how several different accounting methods can skew the results of a ratio analysis
  • Suggest remedial actions to improve a company’s performance as revealed by a ratio analysis
  • Find stock investments using stock screening software and the ratios we will learn in the course

This course will teach you how to compute and interpret the basic ratios used in financial statement analysis, including the following:

  • Activity ratios

    • accounts receivable turnover

    • days sales in accounts receivable

    • inventory turnover

    • days of inventory on hand

    • accounts payable turnover

    • number of days of payables

    • and cash conversion cycle

  • Liquidity ratios

    • current ratio

    • quick ratio

    • cash ratio

    • defensive interval

    • others

  • Solvency ratios

    • debt-to-equity

    • debt-to-capital

    • interest coverage

    • fixed charge coverage

    • others

  • Profitability ratios

    • gross margin

    • profit margin

    • return on assets

    • return on equity

    • others

  • Valuation ratios

    • earnings per share

    • earnings yield

    • price-earnings ratio

    • dividend yield

    • dividend payout

    • others.

You will be able to use a spreadsheet to conduct a complete analysis of a company using Sherwin-Williams, Facebook, and Kroger as examples, including:

  • Dupont analysis

  • equity analysis

  • segment analysis

  • credit analysis.

You will be able to interpret the results and suggest remedial action to improve the company’s performance, noting when certain accounting methods could skew the results.

Lastly, you will be able to use stock screening software to find stock investments using the ratios learned in the course.

The course provides the following resources:

  • quizzes and PowerPoint slide handout for the nineteen modules

  • spreadsheet financial ratios packs that compute all of the ratios for

    • Sherwin-Williams

    • Facebook

    • Kroger

    • blank spreadsheet for you to use with a company of your choice.

    • Ratio handout that provides summary for all of the ratios, including their computation.

This course will help students gain insight into a company’s operations and help prepare them for a rewarding career in accounting and finance, including:

  • corporate finance

  • investment banking

  • private equity

  • mergers and acquisitions

  • hedge fund analysis

  • retail and corporate banking

  • business development

  • financial consulting

  • management consulting

  • auditing, both internal and external

  • risk management

  • asset management

Who this course is for:

  • Anyone working, or seeking employment, in the fields of finance and accounting, or anyone who desires to analyze companies to make stock investment decisions

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    A Beginners Guide to Financial Ratio Analysis
    A Beginners Guide to Financial Ratio Analysis
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