Whether you're a financial professional or an investor, analyzing financial statement information is crucial. But there are so many different numbers that it can seem cumbersome and very intimidating to wade through it all. But if you know what some of the more important figures on these statements are—like financial ratios—you'll probably be on the right track.

The following financial ratios are derived from common 澳洲幸运5官方开奖结果体彩网:income statements and used to compare different companies within the same industry. There are other ratios that are gleaned from an income statement, though the ones below🌃 represent som♕e of the most common.

Gross Margin

澳洲幸运5官方开奖结果体彩网:Gross margin represents how much of a company's sales revenue it keeps after incurring any 澳洲幸运5官方开奖结果体彩网:direct costs associated with producing its goods and services. This ratio is, therefore, the percentage of sales revenue available for profit or reinvestment after the cost of goods sold (🔯COGS) is deducted. So if a company has a gross margin of 40%, that means it keeps 40 cents for every d🐻ollar it makes. It uses the remainder on operating expenses.

Gross margin can be calculated in two ways—by dividing 澳洲幸运5官方开奖结果体彩网:gross profit by net sales or by s♛u🌠btracting the COGS from the company's net sales.

Profit Margin

A profit margin ratio is one of the most common ratios used to determine the p📖rofitability of a business activity. It shows the profit per sale after aဣll other expenses are deducted. Furthermore, it indicates how many cents a company generates in profit for each dollar of sale. So if Company X reports a 35% profit margin, that means its net income was 35 cents for every dollar generated.

In order to figure out the profit margin, you need to divide 澳洲幸运5官方开奖结果体彩网:net income after tax by net sales.

Operating Margin

A company's 澳洲幸运5官方开奖结果体彩网:operating margin equals 澳洲幸运5官方开奖结果体彩网:operating income divided by net sales. This𝔉 is used to show how much revenue is left over after paying variable costs such as wages and raw m🍒aterials. It is the same as the company's return on sales, and indicates how well that return is being managed.

Earnings Per Share

This is one of the most widely cited ratios in the financial world. The result of net income less dividends on 澳洲幸运5官方开奖结果体彩网:preferred stock—which is then divided by average 澳洲幸运5官方开奖结果体彩网:outstanding shares—earnings per share is a crucial determinant of the price of a company's shares bec🍌ause of its ܫuse in calculating price-to-earnings.

Many investors look at earnings per share as a way to determine which stocks they favor by comparing the ratio with the share price. This helps them find out the value of earnings, giving them an idea of a company's future growth.

Price-Earnings Ratio

The price-earnings, or P/E ratio, is calculated by taking 澳洲幸运5官方开奖结果体彩网:market value per share divided by earnings per share. This is one of the most widely used stock valuations and generally shows how much investors pay per dollar of earnings. Simply put, this ratio tells an investor how much he needs to invest in a company in order to receive one dollar of that co🐠mpany's earnings. For this reason, it's often called the price multiple.

If a company has a high P/E ratio, that may mean its share price is high relative to earnings, 🐠potentially maki𒁃ng it overvalued. A low P/E, on the other hand, may indicate its stock price is low relative to its earnings.

Times Interest Earned

Times interest earned (TIE) is an indication of a company's ability to meet debt payments. Divide 澳洲幸运5官方开奖结果体彩网:earnings before interest and taxes, or EBIT, by total annual 澳洲幸运5官方开奖结果体彩网:interest expenses and get the times interest earned ratio.

Return on Stockholders' Equity

澳洲幸运5官方开奖结果体彩网:Return on equity is another critical valuation for shareholders and potential investors and can be calculated by dividing 澳洲幸运5官方开奖结果体彩网:net income after taxes by weig🅘hted average equity, though there are several othe🐎r variations. This indicates the percentage of profit after taxes that the corporation earned.