New in Stock - Preliminary Exam Business Report Samples (Band 6 Exemplar)

Financial Ratios

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Definition:

Financial ratios are mathematical equations that draw information from a firm’s financial statements to indicate a business' performance or position with regards to these strategic objectives: liquidity, solvency, efficiency, and profitability.

The use of financial ratios simplifies the process of understanding a firm’s financial status; the numbers tell a story. They create easily quantifiable measurements that can be tracked over time to analyse trends against past performance and against other firms in the industry. This is called comparative ratio analysis.

In the course you must know how to interpret 7 ratios.

Liquidity Ratio

Current Ratio

Solvency Ratio

Debt to Equity Ratio

Profitability Ratios

Gross Profit Ratio

Net Profit Ratio

Return on Equity

Efficiency Ratios

Expense Ratio

Accounts Receivable Turnover Ratio

Note on the video:

This video is a great start to get to understand the concept of financial ratios.

As you'll see - there are LOTS of ratios in this video that are NOT a part of the HSC course. Don't get confused and overwhelmed!

Please ONLY focus on understanding the 7 ratios of the HSC course - the buttons are linked to them above!

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