**Financial leverage**

# Financial statement analysis

### (Explanations)

**Preparation of common-size financial statements**

**Vertical (common-size) analysis of financial statements**

**Horizontal or trend analysis of financial statements**

**Capital gearing ratio**

**Current assets to equity ratio**

**Fixed assets to equity ratio**

**Proprietary ratio**

**Times interest earned (TIE) ratio**

**Debt to equity ratio**

**Dividend payout ratio**

**Dividend yield ratio**

**Return on capital employed ratio**

**Earnings per share (EPS) ratio**

**Return on common stockholders’ equity ratio**

**Return on total equity or shareholders’ investment ratio**

**Expense ratio**

**Operating ratio**

**Price earnings (P/E) ratio**

**Gross profit (GP) ratio**

**Net profit (NP) ratio**

**Fixed assets turnover ratio**

**Working capital turnover ratio**

**Average payment period**

**Accounts payable turnover ratio**

**Inventory turnover ratio**

**Asset turnover ratio**

**Average collection period**

**Receivables turnover ratio**

**Current cash debt coverage ratio**

**Absolute liquid ratio**

**Quick ratio or acid test ratio**

**Current ratio**

**Classification of financial ratios**

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