The ratios analysis can be
performed to compare the performance of any selected company with
its peer in the same industry by taking the financial data of
latest year. Some examples of ratios and how it can be used to
compare financial performance is given below:
- The debt
to equity ratio is used by the companies to evaluate how much
leverage the company is using. So if the company has the higher the
debt to equity ratio then higher risk is involved and also shows
the aggressiveness of company to grow faster by financing through
debt.
- The
times interest earned ratio helps to measure the number of times
the company is capable to make its interest payments, company’s
probability to make defaults and also useful to decide the various
parameters for debt.
- The fixed assets turnover ratio
indicates the amount of sales revenue which is generated by each
dollar of the investment in the fixed assets. The fixed asset
turnover ratio is the financial tool that indicates how good
company is utilizing its assets to generate revenue.
There are various types of ratios like
liquidity ratios, activity ratios, profitability ratios and
solvency ratios. So for a good research it is required to evaluate
the company’s financial performance from all the perspective. The
data can be taken from the official company website under investor
relation section or from any other similar site and download the
10K form.