In relation to the comparison of data, it must meet certain conditions:

The analysis of financial ratios, indices, ratios or quotients, was one of the first tools developed in financial analysis").

At the beginning of the century, the use by analysts of financial statements became evident, especially the use of the current ratio or liquidity index. During the century, there was a standardization of the set of indices that had been created. For this purpose, optimal levels were created for each financial ratio, regardless of whether the entity or organization to be analyzed was the state of the economy of a country, or a particular company.

Due to the multiple differences that exist in organizations, the current use of these ratios cannot or should not be standardized, since each company or entity has optimal ratios that identify it, depending on the activity it carries out, the deadlines it uses, etc.

The correct interpretation of a ratio, in addition to the conditions mentioned above, must consider:

The results of a ratio will suggest the question "why?", and the answers would come from a deeper or global analysis of the company being analyzed.

Contenido

A continuación se presentan las definiciones de algunas de las ratios de liquidez más comúnmente utilizadas.[9]​[10]​[11]​ Las mismas miden la disponibilidad monetaria de la empresa para hacer frente a las obligaciones en el corto plazo. Su importancia es del 10%.

1) Acid-fast ratio (AR)Go to table

The acid ratio - RA - measures the most immediate capacity that a company has to meet its short-term commitments. It differs from the current ratio, because it eliminates the less liquid items, that is, the characteristics within a Balance Sheet "Balance Sheet (accounting)") that become less likely to be transformed into capital or circulating money.

Acid Test = (Cash + Banks + Shares + Debtors + Debts Receivable) / Current liabilities.

Acid Ratio = (Current Assets - Inventory) / Current Liabilities.

Analysis criterion:.

If RA < 1, the company could suspend its payments or obligations with third parties due to having insufficient liquid (current) assets.

If RA > 1, it indicates the possibility that the company has excess liquidity, resulting in a loss of profitability.

2) Cash ratio (REf)Go to table

Reason that relates to temporary financial investments that a company can convert into cash in 1 or 2 days, which excludes those bank accounts that are not freely available because they are subject to guarantee.

Cash / Current Liabilities =.

Analysis criterion.

Optimal value = 0.3.

For each monetary unit owed, you have 0.3 monetary units of cash in 2 or 3 days.

3) Net working capital over total assets (KTSA)Go to table

It measures the ratio of working capital, (the money that a company has to work with, either in Cash, Current Accounts, Accounts Receivable in 1 year, that is, in the Short Term), after having paid its debts in the Short Term (Current Liabilities) with its available "Assets (accounting)").

Analysis criterion.

Optimal has to be >0. A relatively low ratio could indicate relatively low liquidity levels. It depends on the sector in which the company operates.

4) Net working capital over short-term debts (or current liabilities) (KTSPC)Go to table

It is the surplus that a company has, which says that for each monetary unit owed in the Short Term there are 0.5 monetary units, and also one unit.

5) Days of measurement of the time interval (DMIT)Go to table

It indicates the time interval in which a company can continue operating, if it, due to any type of eventuality, were stopped in its daily activities.

≈ 3,071 (this tells us 3 years)

≈ 26 days.

Finally: DMIT = 1120.87, it would indicate that this company can continue operating for approximately 3 years and 26 days.

Miden la capacidad, en el largo plazo, de una empresa para hacer frente a sus obligaciones. Indica el grado de compromiso existente entre las inversiones realizadas y el patrimonio de una empresa (Capital/Pasivo total).

Debt ratio (RE)Go to table

Indicates the degree of debt of a company, in relation to the responses of its Assets "Asset (accounting)").

Analysis criterion.

Optimal: 0.4 < RE < 0.6. If > 0.6 it means that the company is losing financial autonomy from third parties. If < 0.4, the company may have excess equity capital, it is advisable to have a certain proportion of debt.

Complementing the previous criterion, it can be said, maintaining the "optimal" relationship that: for each monetary unit received by the company, 0.6 monetary units correspond, and are financed, to short-term and long-term debt, while 0.4 monetary units are financed by the company's accounting capital, that is, the shareholders.

Another possible way of equivalent interpretation may be: 60% of the total assets "Asset (accounting)"), has been financed

by short- and long-term creditors.

Debt ratio over total investment (RESIv)Go to table

It measures the magnitude of the financing by external funds, within the total financing (made up of external and own funds).

((current liabilities + long-term liabilities)*100) / assets "Assets (accounting)") total =.

Disaggregation of debt over investment (DESIv)Go to table

It measures the percentage relationship between each of the types of liabilities (both short and long term), with the total assets "Assets (accounting)").

Short-term (CP): (current liabilities / total assets "Assets (accounting)"))*100 =.

Long-term (LP): (long-term liabilities / total assets "Asset (accounting)"))*100 =.

Debt over equity (ESPA)Go to table

It shows the relationship between funds obtained from third parties (liabilities in general) and own equity funds.

((Current liabilities + long-term liabilities)*100) / Net Equity =.

Analysis criterion.

For every 1 monetary unit contributed by equity owners, X.X% of additional financing is obtained from third parties.

The optimum is <= 4.0, or otherwise many of the banking financial policies do not authorize credit disbursements without a real guarantee that said financing will be duly paid by these companies that request it. If this indicator is above that figure, you will simply have to provide something additional in collateral, land, buildings, etc., if you want to have access to credit.

Debt quality ratio (DQR)Go to table

Reason that qualifies the quality of the debt, in relation to the period for its cancellation. The lower this ratio is, the better the quality of the debt in terms of term, since long-term debts will be paid off, although this depends on the sector in which the company subject to analysis is located.

Current liabilities / (current liabilities + long-term liabilities) =.

Optimal: as little as possible.

Example: RCD = 0.71.

-For each monetary unit owed, 0.71 monetary units are short-term.

Thus, 71% of the debt is short-term, and the rest is long-term.

Ratio of financial expenses over sales (RGFSV)Go to table

Indicates the relationship between the financial expenses incurred in operating activities, administration, etc., and the sales obtained in the period in which the expense was incurred.

Total financial expenses / total sales =.

Coverage of financial expenses (CGF)Go to table

(UAI and interest) / financial expenses =.

For each monetary unit that the company has in expenses, it must recover X monetary units.

Cash coverage (CEf)Go to table

((U.A.I and interest) + depreciation) / financial expenses =.

Razón que relaciona el costo de las ventas con las existencias de productos en inventario o bodega.

Coste de ventas / inventarios =.

Days of inventory turnover (DRI)Go to table

365 / inventory rotation =.

Relaciona la adquisición de activos proveniente de las ventas al crédito, con las cuenta de futuros ingresos.

Ventas al crédito / cuentas por cobrar =.

Analysis criterion

It is obtained by dividing the amount of net sales by the balance owed to clients. In this way, it stops.

Days of sales in accounts receivable rotation (DRCxC)Go to table

365 days / accounts receivable turnover =.

Credit sales were collected on average in XX days.

Relaciona el costo de la mercadería vendida (inventario), con las cuentas de futuros pagos.

Costo mercadería vendida / cuenta por pagar =.

The outstanding accounts payable were paid, in a ratio of XX during the year.

365 días / rotación de cuentas por pagar =.

Analysis Criterion

Accounts payable were paid every XX days.

Ventas/total de activos "Activo (contabilidad)") =.

For each monetary unit invested in total assets, monetary units' in sales are generated.

Estas ratios miden la eficiencia de la empresa en la utilización de sus activos "Activo (contabilidad)"), en relación con la eficiencia en la gestión de sus operaciones. Se analizan los rendimientos de la inversión, ventas, el patrimonio, etc.

Profit or profit margin (MU)Go to table

It is the relationship between the remainder in an income statement, after deducting from operating sales, the costs associated with it (operating margin), administrative and sales expenses (operating result), depreciation (gross profit), tax and financial expenses plus other minority interests, which would correspond to net profit, related to sales or operating income. A high level profit margin is desirable.

Net profit (net profits) / Sales =.

Analysis Criterion.

For each monetary unit of sale, X, X monetary units of profit are generated. X, X% profit over sales.

Return on Assets (ROA)Go to table

It relates the net profit obtained in a period to the total assets.

Net profit / total assets "Asset (accounting)") =.

Analysis criterion.

For each monetary unit invested in assets, regardless of how they were financed, the company obtains net profits of X, X monetary units.

It measures the performance of shareholders' investment, in relation to the profit obtained in a period.

Net Profit (net profit) / capital =.

Analysis criterion.

For each monetary unit of capital contributed or invested by the owners, X, X monetary units of net profit are generated.

The following table presents a summary of the most common financial ratios, along with indications about their optimal or desirable values ​​for the company to have a healthy financial state, and notes on their meaning and interpretation.

Financial ratios quantify numerous aspects of a company and form an integral part of the analysis of its financial statements. Financial ratios are categorized according to the financial aspect of the business or company that the ratio measures. Liquidity ratios measure the availability of cash to pay debt.[4]​ Activity ratios measure how quickly a company converts non-current assets into current assets.[5]​ Debt ratios measure a company's ability to repay long-term debt.[6]​ Earning ratios measure the company's use of its assets and control of its expenses to generate an acceptable return.[7]​ Market ratios measure investor response regarding the holding of company shares and also the cost of issuing shares.[8]​

This is related to the return on shareholders' investment, and the relationship between the return and the value of an investment in the company's shares.

Financial ratios allow comparisons to be made:

Ratios are generally not useful unless they are compared against some other value, such as the company's results in a previous business cycle or another company. Therefore the ratios of companies in different industries, which are exposed to different risks, capital requirements, and competition, are generally more difficult to compare.

In relation to the comparison of data, it must meet certain conditions:

The analysis of financial ratios, indices, ratios or quotients, was one of the first tools developed in financial analysis").

At the beginning of the century, the use by analysts of financial statements became evident, especially the use of the current ratio or liquidity index. During the century, there was a standardization of the set of indices that had been created. For this purpose, optimal levels were created for each financial ratio, regardless of whether the entity or organization to be analyzed was the state of the economy of a country, or a particular company.

Due to the multiple differences that exist in organizations, the current use of these ratios cannot or should not be standardized, since each company or entity has optimal ratios that identify it, depending on the activity it carries out, the deadlines it uses, etc.

The correct interpretation of a ratio, in addition to the conditions mentioned above, must consider:

The results of a ratio will suggest the question "why?", and the answers would come from a deeper or global analysis of the company being analyzed.

Contenido

A continuación se presentan las definiciones de algunas de las ratios de liquidez más comúnmente utilizadas.[9]​[10]​[11]​ Las mismas miden la disponibilidad monetaria de la empresa para hacer frente a las obligaciones en el corto plazo. Su importancia es del 10%.

1) Acid-fast ratio (AR)Go to table

The acid ratio - RA - measures the most immediate capacity that a company has to meet its short-term commitments. It differs from the current ratio, because it eliminates the less liquid items, that is, the characteristics within a Balance Sheet "Balance Sheet (accounting)") that become less likely to be transformed into capital or circulating money.

Acid Test = (Cash + Banks + Shares + Debtors + Debts Receivable) / Current liabilities.

Acid Ratio = (Current Assets - Inventory) / Current Liabilities.

Analysis criterion:.

If RA < 1, the company could suspend its payments or obligations with third parties due to having insufficient liquid (current) assets.

If RA > 1, it indicates the possibility that the company has excess liquidity, resulting in a loss of profitability.

2) Cash ratio (REf)Go to table

Reason that relates to temporary financial investments that a company can convert into cash in 1 or 2 days, which excludes those bank accounts that are not freely available because they are subject to guarantee.

Cash / Current Liabilities =.

Analysis criterion.

Optimal value = 0.3.

For each monetary unit owed, you have 0.3 monetary units of cash in 2 or 3 days.

3) Net working capital over total assets (KTSA)Go to table

It measures the ratio of working capital, (the money that a company has to work with, either in Cash, Current Accounts, Accounts Receivable in 1 year, that is, in the Short Term), after having paid its debts in the Short Term (Current Liabilities) with its available "Assets (accounting)").

Analysis criterion.

Optimal has to be >0. A relatively low ratio could indicate relatively low liquidity levels. It depends on the sector in which the company operates.

4) Net working capital over short-term debts (or current liabilities) (KTSPC)Go to table

It is the surplus that a company has, which says that for each monetary unit owed in the Short Term there are 0.5 monetary units, and also one unit.

5) Days of measurement of the time interval (DMIT)Go to table

It indicates the time interval in which a company can continue operating, if it, due to any type of eventuality, were stopped in its daily activities.

≈ 3,071 (this tells us 3 years)

≈ 26 days.

Finally: DMIT = 1120.87, it would indicate that this company can continue operating for approximately 3 years and 26 days.

Miden la capacidad, en el largo plazo, de una empresa para hacer frente a sus obligaciones. Indica el grado de compromiso existente entre las inversiones realizadas y el patrimonio de una empresa (Capital/Pasivo total).

Debt ratio (RE)Go to table

Indicates the degree of debt of a company, in relation to the responses of its Assets "Asset (accounting)").

Analysis criterion.

Optimal: 0.4 < RE < 0.6. If > 0.6 it means that the company is losing financial autonomy from third parties. If < 0.4, the company may have excess equity capital, it is advisable to have a certain proportion of debt.

Complementing the previous criterion, it can be said, maintaining the "optimal" relationship that: for each monetary unit received by the company, 0.6 monetary units correspond, and are financed, to short-term and long-term debt, while 0.4 monetary units are financed by the company's accounting capital, that is, the shareholders.

Another possible way of equivalent interpretation may be: 60% of the total assets "Asset (accounting)"), has been financed

by short- and long-term creditors.

Debt ratio over total investment (RESIv)Go to table

It measures the magnitude of the financing by external funds, within the total financing (made up of external and own funds).

((current liabilities + long-term liabilities)*100) / assets "Assets (accounting)") total =.

Disaggregation of debt over investment (DESIv)Go to table

It measures the percentage relationship between each of the types of liabilities (both short and long term), with the total assets "Assets (accounting)").

Short-term (CP): (current liabilities / total assets "Assets (accounting)"))*100 =.

Long-term (LP): (long-term liabilities / total assets "Asset (accounting)"))*100 =.

Debt over equity (ESPA)Go to table

It shows the relationship between funds obtained from third parties (liabilities in general) and own equity funds.

((Current liabilities + long-term liabilities)*100) / Net Equity =.

Analysis criterion.

For every 1 monetary unit contributed by equity owners, X.X% of additional financing is obtained from third parties.

The optimum is <= 4.0, or otherwise many of the banking financial policies do not authorize credit disbursements without a real guarantee that said financing will be duly paid by these companies that request it. If this indicator is above that figure, you will simply have to provide something additional in collateral, land, buildings, etc., if you want to have access to credit.

Debt quality ratio (DQR)Go to table

Reason that qualifies the quality of the debt, in relation to the period for its cancellation. The lower this ratio is, the better the quality of the debt in terms of term, since long-term debts will be paid off, although this depends on the sector in which the company subject to analysis is located.

Current liabilities / (current liabilities + long-term liabilities) =.

Optimal: as little as possible.

Example: RCD = 0.71.

-For each monetary unit owed, 0.71 monetary units are short-term.

Thus, 71% of the debt is short-term, and the rest is long-term.

Ratio of financial expenses over sales (RGFSV)Go to table

Indicates the relationship between the financial expenses incurred in operating activities, administration, etc., and the sales obtained in the period in which the expense was incurred.

Total financial expenses / total sales =.

Coverage of financial expenses (CGF)Go to table

(UAI and interest) / financial expenses =.

For each monetary unit that the company has in expenses, it must recover X monetary units.

Cash coverage (CEf)Go to table

((U.A.I and interest) + depreciation) / financial expenses =.

Razón que relaciona el costo de las ventas con las existencias de productos en inventario o bodega.

Coste de ventas / inventarios =.

Days of inventory turnover (DRI)Go to table

365 / inventory rotation =.

Relaciona la adquisición de activos proveniente de las ventas al crédito, con las cuenta de futuros ingresos.

Ventas al crédito / cuentas por cobrar =.

Analysis criterion

It is obtained by dividing the amount of net sales by the balance owed to clients. In this way, it stops.

Days of sales in accounts receivable rotation (DRCxC)Go to table

365 days / accounts receivable turnover =.

Credit sales were collected on average in XX days.

Relaciona el costo de la mercadería vendida (inventario), con las cuentas de futuros pagos.

Costo mercadería vendida / cuenta por pagar =.

The outstanding accounts payable were paid, in a ratio of XX during the year.

365 días / rotación de cuentas por pagar =.

Analysis Criterion

Accounts payable were paid every XX days.

Ventas/total de activos "Activo (contabilidad)") =.

For each monetary unit invested in total assets, monetary units' in sales are generated.

Estas ratios miden la eficiencia de la empresa en la utilización de sus activos "Activo (contabilidad)"), en relación con la eficiencia en la gestión de sus operaciones. Se analizan los rendimientos de la inversión, ventas, el patrimonio, etc.

Profit or profit margin (MU)Go to table

It is the relationship between the remainder in an income statement, after deducting from operating sales, the costs associated with it (operating margin), administrative and sales expenses (operating result), depreciation (gross profit), tax and financial expenses plus other minority interests, which would correspond to net profit, related to sales or operating income. A high level profit margin is desirable.

Net profit (net profits) / Sales =.

Analysis Criterion.

For each monetary unit of sale, X, X monetary units of profit are generated. X, X% profit over sales.

Return on Assets (ROA)Go to table

It relates the net profit obtained in a period to the total assets.

Net profit / total assets "Asset (accounting)") =.

Analysis criterion.

For each monetary unit invested in assets, regardless of how they were financed, the company obtains net profits of X, X monetary units.

It measures the performance of shareholders' investment, in relation to the profit obtained in a period.

Net Profit (net profit) / capital =.

Analysis criterion.

For each monetary unit of capital contributed or invested by the owners, X, X monetary units of net profit are generated.

The following table presents a summary of the most common financial ratios, along with indications about their optimal or desirable values ​​for the company to have a healthy financial state, and notes on their meaning and interpretation.