Finance Financial Statements and Ratios

Fundamental Analysis 

uses quantitative and qualitative data using balance sheets and income statements 

quantitative analysis

analyze the company using numbers and data

qualitative analysis

analyze the company using non numerical data to assess its overall performance and potential

technical analysis

using patterns in market data to identify trends and make predictions 

balance sheet

company’s financial statements

balance sheet equation

assets + liabilities = owners equity

Total debt to equity 

Formula: total debt/ owners equity 

How much debt a company uses to finance its assets 

• Lower is considered better 

Current Ration

Formula: current assets / current liabilities

How capable a company is of paying its debt obligations

• over 1 = healthy

Quick Ratio

Formula: (Current assets - liabilities) / current liabilities

Company's ability to pay its short-term debts using only its most liquid assets

• higher the better

Income Statement

Shows total revenue over a period of time (quarterly 3 months / annual 12 months)

• If company is making money

Income Statement equation 

Revenue - Expenses = net income 

Gross Profit or Gross income

Profit from company’s core business activities (Before taxes or expenses, not final profit)

TTM

Trailing Twelve Months

Show the most accurate data; most recent last 4 quarters (Q1 [Q2 Q3 Q4 Q1])

EPS 

Earning per Share

Formula: Net income / outstanding shares

Measure of a company's profitability

ROE

Return on Equity

Formula: Net income / shareholders equity

Show profitability

• higher better

Profit Margin

Profit Margin Measures how much money company is making in sales or revenue 

• Net income / revenue 

• Net profit / sales 

Gross Profit Margin 

Formula: gross profit / revenue 

Gross profit = revenue - COGS