Financial ratios are used to help us quickly gain the financial health of a business we are looking at (either to buy, invest in, run, work for, work with, outsource to and/or partner with). It is important for managers to be aware of these and how their actions can change the ratio’s output. It also should be part of your company’s strategy to keep these ratios in-line with that of industry norms, shareholder expectations and they will be taken into consideration by the people who finance your business.

The ratios below are the most commonly used ones in the UK. I have split them into three different sections; performance, financial and stock market.

Please keep in mind that one year’s figures in isolation doesn’t really tell you much. These need to be put on a graph and compared year on year. You should also compare these ratios with competitors and industry peer group. Continue reading →