7 Important Financial Ratios (2024)

FAQs

What are the 7 financial ratios? ›

Financial ratio analysis is often broken into six different types: profitability, solvency, liquidity, turnover, coverage, and market prospects ratios. Other non-financial metrics may be scattered across various departments and industries.

Instead, you can write down the ratio and work on each ratio with different numbers until you remember the formula. By doing this, you will be able to remember the formulas easily. After solving this, you can take another example to solve the current ratio until you remember the formula.

Gauge your progress by tracking your emergency fund ratio, basic housing ratio, overall debt-to-income ratio and savings rate. Additionally, consider tracking your debt-to-total assets ratio, net-worth-to-total assets ratio, return-on-investments ratio and investment-assets-to-gross-pay ratio.

A common rule of thumb is that a “good” current ratio is 2 to 1. Of course, the adequacy of a current ratio will depend on the nature of the business and the character of the current assets and current liabilities.

To make sure ratios are well-explained, give children as many examples from real life as possible. This will make it easier for them to understand the concept. Examples can be found in all parts of life, from cooking to sports. We use ratios daily, even if we don't notice.

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The estimated total pay range for a Franchise Owner at 7-Eleven is $88K–$164K per year, which includes base salary and additional pay. The average Franchise Owner base salary at 7-Eleven is $99K per year.

The four key financial ratios used to analyse profitability are: Net profit margin = net income divided by sales. Return on total assets = net income divided by assets. Basic earning power = EBIT divided by total assets.

Do not subtract other amounts that may be withheld or automatically deducted, like health insurance or retirement contributions. Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

What is the 70 20 10 financial ratio? ›

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

Ratios include the working capital ratio, the quick ratio, earnings per share (EPS), price-to-earnings (P/E), debt-to-equity (D/E), and return on equity (ROE). Most ratios are best used in combination with others rather than singly to accomplish a comprehensive picture of a company's financial health.