These are 15 key financial ratios and concepts, along with the formulas for calculating them, how they are used, and examples of good performance. This tool is particularly useful for leaders who do not have a financial background but need to understand financial yardsticks. (2 pages)
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15 Key Financial Ratios
Here are the 15 most commonly used financial ratios:
Formula: current assets / current liabilities
Comments: Measures cash reserves; 2 is solid; varies by industry.
Formula: current assets minus inventory / current liabilities
Comments: Indicates what a company can realize in cash right away; 1 is solid.
Formula: earnings minus interest, taxes and amortization.
Comments: Indicates underlying financial performance by stripping away non-revenue based factors.
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