1. Introduction to Financial Ratios:
- Overview of financial ratios and their importance in financial analysis.
- Different categories of financial ratios: liquidity ratios, profitability ratios, solvency ratios, and activity ratios.
- Calculation and interpretation of common financial ratios.
2. Liquidity Ratios:
- Current ratio: measures a company's ability to cover short-term liabilities with short-term assets.
- Quick ratio: assesses a company's ability to meet short-term obligations using its most liquid assets.
- Cash ratio: evaluates a company's ability to pay off current liabilities with its cash and cash equivalents.
3. Profitability Ratios:
- Gross profit margin: measures the profitability of a company's core operations.
- Net profit margin: indicates the percentage of revenue that translates into net income.
- Return on assets (ROA): assesses how efficiently a company uses its assets to generate profit.
4. Solvency Ratios:
- Debt-to-equity ratio: measures the proportion of debt financing relative to equity financing.
- Interest coverage ratio: evaluates a company's ability to meet interest payments on its debt.
- Debt ratio: indicates the percentage of a company's assets financed by debt.
5. Activity Ratios:
- Inventory turnover ratio: assesses how quickly a company sells its inventory.
- Accounts receivable turnover ratio: measures the effectiveness of a company's credit and collection policies.
- Asset turnover ratio: evaluates the efficiency with which a company uses its assets to generate sales.
6. Case Studies and Practical Applications:
- Analyzing real-world financial statements and applying various financial ratios to assess performance and make informed decisions.
- Interpreting financial ratios in different industries and contexts.
- Identifying trends, strengths, and weaknesses based on financial ratio analysis.
7. Limitations and Caveats of Financial Ratios:
- Understanding the limitations of financial ratios and their potential pitfalls.
- Recognizing external factors that may impact the interpretation of financial ratios.
- Exploring additional financial analysis techniques to complement ratio analysis.
8. Financial Reporting and Disclosures:
- Familiarization with financial statements and their components (balance sheet, income statement, cash flow statement).
- Understanding the role of financial disclosures and footnotes in providing additional context to financial ratios.
- Analyzing financial reports to extract relevant information for ratio analysis.