Financial accountants use ratios like liquidity (current, quick), profitability (net profit margin, ROE), efficiency (asset turnover, inventory turnover), debt (debt-to-equity, interest coverage), market (P/E, dividend yield), and cash flow (operating, free cash flow) to assess a company's financial health and performance.
Financial accountants employ a range of ratios and metrics to assess a company's financial standing and performance. Liquidity ratios like the current and quick ratios measure short-term solvency by evaluating the company's ability to meet immediate obligations.
Profitability ratios, such as net profit margin and return on equity, highlight the company's capacity to generate profits relative to revenue and equity investments. Efficiency ratios, including asset turnover and inventory turnover.
Debt ratios, like debt-to-equity and interest coverage ratios, indicate the company's leverage and ability to handle debt. Market ratios, such as price-to-earnings and dividend yield, reflect market sentiment. Cash flow metrics, such as operating cash flow and free cash flow.
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What specific ratios or metrics can financial accountants use to assess a company's financial performance?