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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.

Learning Objectives

  • Explore basic financial ratio analyses and math concepts.
  • Explore the concept of solvency ratios including:
    • Equity Ratio 
    • Debt Ratio
    • Debt/Equity Ratio
    • Total Debt/Total Assets
    • Times Interest Earned
    • Fixed Assets/Net Worth
  • Explore the concept of liquidity ratios including:
    • Current ratio (Working Capital (WC) ratio)
    • Quick ratio (acid test ratio)
    • Cash ratio
    • Working capital
    • Debt/Inventory
  • Explore math theories to analyze ratio changes.
  • Explore a comprehensive example of ratio calculation.
Last updated/reviewed: November 16, 2019

Included In Certifications

This course is included in the following Certification Programs:

18 CoursesFinancial Statement Preparation, Reporting and Auditing Certification

  1. Financial Statement Introduction
  2. GAAP Principles, Assumptions and Considerations
  3. GAAP Presentation of Financial Statements
  4. Management Discussion and Analysis (MD&A) Update
  5. Sarbanes Oxley (SOX) Overview
  6. Sarbanes-Oxley Section 302: ICFR
  7. XBRL (Extensible Business Reporting Language) Introduction to Basics - Updated
  8. XBRL - Connection to SOX 302/404 and Critical Roles
  9. Analyzing Financial Ratios - Solvency, Liquidity and Debt
  10. Analyzing Financial Ratios - Leverage
  11. Analyzing Financial Ratios - Performance And Efficiency
  12. Conducting An Audit In Accordance With GAAS - Part 1
  13. Conducting An Audit In Accordance With GAAS - Part 2
  14. Conducting An Audit In Accordance with GAAS - Part 3
  15. Introduction to Accounting for Income Taxes Based on Income
  16. Practical Application For Accounting For Income Taxes Based On Income Part 1
  17. Practical Application For Accounting For Income Taxes Based On Income Part 2
  18. FASB Codification Research System

5 Reviews (8 ratings)Reviews

5
Member's Profile
Lynn, What a nice ratio review. People forget how important these Key Performance Indicators are and you have shown the light on their importance ina easy to understand way. Keep the courses coming. I love 'em. Larry
5
Anonymous Author
Great course. Stated learning objectives were met. Program materials were relevant and contributed to the achievement of the learning objectives
4
Anonymous Author
Course instructor covers several important ratios in a very concise and clear format.
5
Anonymous Author
Subject matter was presented on a very basic level, but was clear in presentation.
5
Member's Profile
This was a good review of the various ratios and their uses.

Prerequisites

Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  5:20Introduction to Financial Ratio Analysis – Solvency, Liquidity and Debt Ratios
  6:15Math
  8:37Solvency & Equity Ratios
  7:14Debt & Debt/Equity Ratio
  3:49Debt/Asset & Times Interest Earned
  4:16Fixed Assets/NW & Liquidity Ratios
  6:32Current Ratio
  3:45Quick & Cash Ratio
  11:37Working Capital & Interpreting Analysis
  12:10Comprehensive Example & Summary
CONTINUOUS PLAY
  1:09:38Financial Ratio Analysis – Solvency, Liquidity and Debt Ratios
Supporting Materials
  PDFSlides: Financial Ratio Analysis
  PDFFinancial Ratio Analysis Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM