Top Six Ratios Every Investor Should Know

1. Current Ratio: It shows the current ratio and current assets. The current ratio determines a company’s liquidity.
2. Return on Equity: It shows the net income and shareholder equity. Return on equity indicates how well a company is generating profits for the shareholders.
3. Price to Earnings: It shows share price and earnings per share. Price earnings compare a company to others in the same industry.
4. Return on Assets: It shows the net income and total assets. Return on assets indicates how well a company is generating profits for its shareholders.
5. Debt to Equity: Shows total liabilities and total shareholder equity. Debt to equity shows how leveraged a company is.
6. Return on Invested Capital: It shows the net income(dividend, debt, and equity). Return on invested capital indicated the efficiency at allocating total capital to generate profit.