Financial ratios are financial metrics that determine relationships between aspects of a company’s operations and financial position. Although financial statement ratios have long been used to assist finance and accountanting professionals with evaluating the health and profitability of organizations, many people focus on the “calculation” rather than “what the ratio may be communicating". It is important to fully understand the purpose of the ratios and what they can tell you about your organization. 

Most balance sheet ratios are basic and easy to calculate. They include only balance sheet items such as assets, liabilities and shareholder’s equity in their calculation.

The various financial statement ratio types include:

  • Liquidity and Solvency Ratios
  • Financial Leverage and Debt Ratios
  • Asset Efficiency or Turnover Ratios
  • Profitability ratios
  • Market value ratios

This course will focus on Liquidity, Solvency and Debt ratios.

Note: This course is also a part of The Controllership Series.

Learning Objectives
  • Explore basic financial ratio analyses and math concepts.
  • Explore the concept of solvency ratios including:
    • Equity Ratio 
    • Debt Ratio
    • Debt/Equity Ratio
    • Total Debt/Total Assets
    • Times Interest Earned
    • Fixed Assets/Net Worth
  • Explore the concept of liquidity ratios including:
    • Current ratio (Working Capital (WC) ratio)
    • Quick ratio (acid test ratio)
    • Cash ratio
    • Working capital
    • Debt/Inventory
  • Explore math theories to analyze ratio changes.
  • Explore a comprehensive example of ratio calculation.
Last updated/reviewed: March 8, 2024

Included In Certifications

This course is included in the following Certification Programs:

18 CoursesFinancial Statement Preparation, Reporting and Auditing Certification

  1. Financial Statement Introduction
  2. GAAP Principles, Assumptions and Considerations
  3. GAAP Presentation of Financial Statements
  4. Management Discussion and Analysis (MD&A) Update
  5. Sarbanes Oxley Overview
  6. Sarbanes-Oxley Section 302: ICFR
  7. XBRL (Extensible Business Reporting Language) Introduction to Basics - Updated
  8. XBRL - Connection to SOX 302/404 and Critical Roles
  9. Analyzing Financial Ratios - Solvency, Liquidity and Debt
  10. Analyzing Financial Ratios - Leverage
  11. Analyzing Financial Ratios - Performance And Efficiency
  12. Financial Statement Audit in Accordance with GAAS - General Standards
  13. Financial Statement Audit in Accordance with GAAS - Conducting the Audit
  14. Financial Statement Audit in Accordance with GAAS - Auditors' Report and Opinion
  15. Introduction to Accounting for Income Taxes Based on Income
  16. Practical Application For Accounting For Income Taxes Based On Income Part 1
  17. Practical Application For Accounting For Income Taxes Based On Income Part 2
  18. FASB Codification Research System

15 CoursesManagement Oversight, Analysis and Internal Controls Certification

  1. Management Internal Control Essentials
  2. Comprehensive Examination of COSO 2013: Components and Principles
  3. Keys to an Effective Code of Conduct
  4. Fraud Risk Assessments
  5. Enterprise Risk Management 101
  6. Identifying and Implementing the Proper Balance of Internal Controls
  7. Information Technology (IT) Controls in Emerging Business Environments
  8. Analyzing Financial Ratios - Solvency, Liquidity and Debt
  9. Analyzing Financial Ratios - Leverage
  10. Effectively Managing and Controlling Travel and Entertainment (T&E) Expenses
  11. Keys to Understanding Conflicts of Interest
  12. Documentation Methods For Internal Control Processes
  13. Segregation of Duties for Core Business Processes
  14. Professional Skepticism - Keys to Maintaining
  15. Whistleblower Hotlines - Effective Management
16 Reviews (69 ratings)

Reviews

5
Member's Profile
Lynn, What a nice ratio review. People forget how important these Key Performance Indicators are and you have shown the light on their importance ina easy to understand way. Keep the courses coming. I love 'em. Larry
5
Anonymous Author
Great course. Stated learning objectives were met. Program materials were relevant and contributed to the achievement of the learning objectives
5
Anonymous Author
Another great course from Professor Lynn! This was a great reminder of the importance of financial ratios on measuring financial statements.
4
Anonymous Author
The review of math concepts at the beginning is useful even though we all think we are comfortable with that.
4
Member's Profile
Are we going to go over Z scores? This was very helpful. Could you tell where to find industry ratios?
4
Anonymous Author
Excellent presentation and discussion of financial ratios and how to calculate and interpret them.
5
Anonymous Author
The instructor did an excellent job of explaining the basic material behind the various ratios.
5
Anonymous Author
The comprehensive example at the end of the presentation helped tie all the ratios together.
4
Anonymous Author
Course instructor covers several important ratios in a very concise and clear format.
5
Anonymous Author
Subject matter was presented on a very basic level, but was clear in presentation.
5
Anonymous Author
Great overview of considerations for solvency and long term planning!
5
Anonymous Author
Good refresher on ratios. The example at the end was helpful.
5
Member's Profile
This was a good review of the various ratios and their uses.
5
Anonymous Author
Good overview of financial ratios and what they interpret.
5
Member's Profile
A very interesting course. A nice review of ratio's
5
Anonymous Author
The slides were a bit rough in this presentation.
show all reviews
Prerequisites
Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION AND OVERVIEW
  Introduction to Financial Ratio Analysis – Solvency, Liquidity and Debt Ratios5:20
  Math6:15
  Solvency & Equity Ratios8:38
  Debt & Debt/Equity Ratio7:15
  Debt/Asset & Times Interest Earned3:50
  Fixed Assets/NW & Liquidity Ratios4:17
  Current Ratio6:32
  Quick & Cash Ratio3:46
  Working Capital & Interpreting Analysis11:37
  Comprehensive Example & Summary12:10
CONTINUOUS PLAY
  Financial Ratio Analysis – Solvency, Liquidity and Debt Ratios 1:09:41
Supporting Materials
  Slides: Analyzing Financial Ratios - Solvency, Liquidity and DebtPDF
  Analyzing Financial Ratios - Solvency, Liquidity and Debt Glossary/IndexPDF
REVIEW AND TEST
  REVIEW QUESTIONS quiz
 FINAL EXAMexam