Analyzing Financial Ratios – Solvency, Liquidity and Debt

Financial ratios are financial metrics that determine relationships between aspects of a company’s operations and financial position. Although financial statement ratios have long been used to assist finance and accountanting professionals with evaluating the health and profitability of organizations, many people focus on the “calculation” rather than “what the ratio may be communicating”. It is important to fully understand the purpose of the ratios and what they can tell you about your organization. 

Most balance sheet ratios are basic and easy to calculate. They include only balance sheet items such as assets, liabilities and shareholder’s equity in their calculation.

The various financial statement ratio types include:

• Liquidity and Solvency Ratios
• Financial Leverage and Debt Ratios
• Asset Efficiency or Turnover Ratios
• Profitability ratios
• Market value ratios

This course will focus on Liquidity, Solvency and Debt ratios.

Note: This course is also a part of The Controllership Series.