Financial Ratios

The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that, properly understood and applied, can help make you a more informed investor. Fundamental analysis relies on extracting data from corporate financial statements to compute various ratios. Financial ratios aim to capture a vast quantity of information about a company's debt, profitability, valuation, and performance in a single number Remember that a company cannot be properly evaluated or analyzed using just one ratio in isolation - always combine ratios and metrics to get a complete picture of a company's prospects.