Financial Ratio

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Financial Ratio

Meaning:

A financial ratio is a numerical comparison between two financial values that helps measure a company’s performance, stability, efficiency, or profitability. These ratios are derived from financial statements such as the balance sheet, income statement, and cash flow

statement.

Example:

For example, if a company has a net income of ₹5,00,000 and total assets of ₹25,00,000, its return on assets (ROA) would be 20%, indicating how efficiently it uses its assets to generate profit.

How to understand Financial Ratio:

Financial ratios are essential for investors to judge a company’s financial health.

They facilitate comparisons with competitors and industry benchmarks.

Uses of Financial Ratio:
Analyzing companies before making investment decisions.

Comparing performance over time to evaluate growth.

Assessing the risk level associated with investments.

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Disclaimer

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Financial Ratio

Uses of Financial Ratio: Analyzing companies before making investment decisions. Comparing performance over time to evaluate growth. Assessing the risk level associated with investments.

Uses of Financial Ratio:
Analyzing companies before making investment decisions.

Comparing performance over time to evaluate growth.

Assessing the risk level associated with investments.