Session 6: Financial Ratios

In this session, I look at the financial ratios, where we scale numbers to a common denominator to make them comparable across companies, across time and to benchmarks. I start with profit margins, drawing distinctions between different margin measures and the information in each one. I then examine accounting returns on equity and invested capital, and the measurement issues with each. In the third section, I examine how efficiency ratios can be used to measure how painlessly companies can scale up.  In the final sections, I look at debt scaled to capital and to cash flows (EBITDA) and I end with an assessment of coverage and liquidity ratios.
Slides: http://www.stern.nyu.edu/~adamodar/pd...
Post class test: http://www.stern.nyu.edu/~adamodar/pd...
Post class test solution:  http://www.stern.nyu.edu/~adamodar/pd...

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• #corporate
• #finance