Some key financial ratios that analysts often use to evaluate a company's financial condition include:
- Debt-to-equity ratio: Measures a company's financial leverage, the amount of debt used to finance its assets. A high ratio may indicate more risk.
- Current ratio: Measures a company's ability to pay short-term obligations with its current assets. A ratio under 1 suggests the company may struggle to meet obligations.
- Return on equity: Measures how efficiently a company generates profits from its shareholders' equity. A high ratio is favorable as it indicates more efficient use of shareholder funds.
- Profit margin: Measures what percentage of revenue is left over as profit after all costs and expenses.