Key takeaways
- A financial ratio is an analysis method that is used to provide insights into a company’s financial performance.
- Different types of financial ratios help in analyzing a company’s financial performance in context with other financial data and industry benchmarks.
- Financial ratios are useful in knowing the performance of a company with other companies in the market.
What is a financial ratio?
A financial ratio is a quantitative analysis method that compares two or more financial numbers to each other to provide insight into a company’s financial performance and health.
Financial ratios can be calculated using data from a company’s financial statements such as the balance sheet, income statement, and cash flow statement.
Types of financial ratios
- Liquidity Ratios: Measure a company’s ability to meet its short-term obligations with its current assets.
- Profitability Ratios: Measure a company’s ability to generate profits relative to its revenue, assets, and equity.
- Coverage Ratios: Measure a company’s ability to manage its debt obligations.
- Efficiency Ratios: Measure how a company can use its assets and resources efficiently to generate revenue.
- Market Value Ratios: Measure a company’s performance relative to the market and its peers.
It’s important to note that no single ratio can provide a complete picture of a company’s financial performance, and ratios should always be analyzed in context with other financial data and industry benchmarks.
Uses of financial ratios
- Financial Analysis: Financial analysts use ratios to assess a company’s financial health and compare it to its peers and industry benchmarks.
- Investment Decisions: By analyzing ratios like the price-to-earnings ratio, investors can determine whether a stock is undervalued or overvalued relative to its earnings and growth prospects.
- Credit Decisions: Creditors use ratios to assess a company’s creditworthiness and ability to pay back loans. Analyzing ratios helps creditors to determine whether a company has sufficient assets and cash flow to service its debt obligations.
- Management Performance: Investors and analysts can determine whether management is effectively using the company’s resources to generate profits and create value for shareholders.
- Benchmarking: Ratios can be used to compare a company’s financial performance to industry standards and best practices. Companies can identify areas where they are underperforming and take steps to improve their efficiency and profitability.
Benefits of financial ratios
- Performance measurement: By comparing ratios from different periods, individuals can determine whether a company’s financial performance is improving or declining.
- Comparison with industry peers: Financial ratios can help individuals identify areas where a company may be performing well or underperforming relative to its competitors.
- Investment decisions: By analyzing a company’s financial ratios, investors can determine whether a company is financially stable, profitable, and likely to provide a good return on investment.
- Credibility evaluation: Financial ratios can be used to evaluate a company’s credibility. Lenders and creditors often use financial ratios to determine whether a company is capable of repaying debt.
- Forecasting future performance: Financial ratios can be used to forecast a company’s future financial performance. Read more about Financial Forecasting.
Who uses financial ratios?
Financial ratios are used by investors, analysts, and managers to evaluate a company’s financial health, performance, and potential risks.
Why is financial ratio analysis important?
Financial ratios are important because they provide valuable insights into a company’s financial performance and health making it easier to make decisions that affect the company.
Bottom Line
Financial ratios provide a quick and easy way to analyze a company’s financial health and performance. They are used in making informed decisions about investing, lending, and managing their resources. It is advisable to regularly do financial ratio analysis to gauge your company’s performance and make better decisions.
ALSO READ
GLOSSARY
Good evening, my question to you please if open an account today in naira his the money will converted to us dollar to running the account
If you are investing in a dollar fund, yes.
Can the funds be traded rather than investing to increase gains?
What if your money is in cash(Dollar)
Please I already have an account, will I have to re-open another account before investing in dollar?
Can I invest in the next eurobond using dollar (cash)? If yes, will my returns be in dollar as well or it will be converted to naira??
Hi Helen, you can invest in Eurobonds at any time. However, we only accept naira deposits at the moment. Also, your returns accrue in dollars.
So which is best to earn the second way or first?
Focusing on returns will be better
Hi, what is the minimum amount you can invest with.
Hi there. You can invest the naira equivalent of $100
Hi Ope, does that mean I’d need two accnts to operate the fund, I.e a naira account to put in the naira funds which is d only 1 u currently accept, then a domicilary account where my returns would accrue in?
I want to invest in your Eurobond.
I have re-installed your new app an still can get the eurobond plan?
How much is the minimum equivalent dollar for a start?
Can i get an overview of all the benefits and rules of this plan?
***and still can’t get the eurobond plan?
Do you allow people from south Africa
Hello, my question is if I invest in the dollar mutual fund how do I get the returns?
Will it be in naira or in dollars and will I have to open another account for the returns to go into
Can’t you go down to 50USD
Hello Nsikak, currently the minimum is $100 but we we are looking at a possible review in the future.
The new minimum is $10
Hello will I have to re-open another account before investing in dollar?
luckysolomon444@gmail.com
I have invested in dollars mutual fund… It means I Will get my return in one year
Hi Jonathan,
How is the return/interest on your investment from November 27,2020 so far??
No you don’t have to, just click on invest in mutual funds, you will see the options there. You can navigate and alot with your account.
If I invest in the euro bond, it is expected that my return accrues in dollar, right? And how do I withdraw the dollar? Do I need to convert it to naira, if yes, how can I convert my dollar to naira on the app. Lastly, how long do I need to leave my investment on cowrywise? Or can I withdraw anytime?
Am interested. Let’s say I put in a $1,000. What the ROI…within 1 year.
Your interest is 6.6% then calculate it for one year, I think so
Hello,
As a Nigerian, can I save my money in dollars even though I don’t want to invest in a dollar mutual fund?
Pretty soon, yes!
If l invest in naira am l going to get it back in dollar
You’d be getting it at the prevalent naira exchange value of the dollar.
Am going to save in naira am going to get it back in dollar
You’d be getting it at the prevalent naira exchange value of the dollar.
Hello ope pls how much is $10 in naira
How long does the investment last.i.e when can I get my returns
I will give BIG CONGRATULATIONS to the entire Management of COWRYWISE for this wonderful opportunity to be a good investor with simple and sound education on various investment opportunities an investment can be done with little and grow within a short period period of time
God bless
Thank you so much ?
Now if I put 100$ in one year what is my return
If my return will be in the current dollar rate at the time, when i am investing and when am getting my returns, what exchange rate do u use? Black market rates or the bank rates – please verify in each case. Thanks.
Hello please if you can create the one we can start with the minimum $1 we’ll be happy ??
I just started investing in eurobond funds on cowrywise. So far so good, it has been a good platform to invest money and earn back. Kudos to the team behind this platform