The company that I have selected for Financial Ratio analysis is GOOGLE.
The Ratios that I am going to analyze are grouped under four main headings: 1) Profitability
Ratio 2) Liquidity Ratio 3) Debt Ratio 4) Market Ratio
1. Profitability Ratio - Profitability ratios measure the firm's use of its assets and control of its
expenses to generate an acceptable rate of return.
a. ROE - Return On Equity - Measures the rate of return on the ownership interest
(shareholders' equity) of the common stock owners. ROE is viewed as one of the most
important financial ratios. It measures a firm's efficiency at generating profits from every
dollar of net assets (assets minus liabilities), and shows how well a company uses
investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income
divided by total equity expressed as a percentage.
b. ROI - Return On Investment - Is the ratio of money gained or lost on an investment relative
to the amount of money invested. ROI is used to compare returns on investments where
the money gained or lost — or the money invested — are not easily compared using
monetary values. ROI is a measure of cash (or potential cash) generated by an investment,
or the cash lost due to the investment. It measures the cash flow or income stream from
the investment to the investor. Cash flow to the investor can be in the form of profit,
interest, dividends, or capital gain/loss. Capital gain/loss occurs when the market value or
resale value of the investment increases or decreases. Cash flow here does not include the
return of invested capital.
2. Liquidity Ratio - Liquidity is a measure of the ability of a debtor to pay their debts as and when
they fall due. It ...