What are key financial ratios and what do they mean
Understand simple ratios that show if a company is strong or weak and help you compare it with others.
Financial ratios help you understand if a company is strong or weak.
• The profit margin tells you how much money the company keeps after paying costs.
• The debt to equity ratio shows how much the company depends on loans.
• The current ratio shows if the company can pay its short term bills.
• The return on equity shows how well the company uses shareholders money.
In simple words
Ratios help you compare one company with another in a fair way.