Financial Ratio Formulas &
Advanced Investing Strategies

Financial ratio formulas don't have to be confusing! We've assembled all the basic ratios in clear, concise formulas. Even the best investors return to these fundamentals each day.

Continue reading to learn more about why it's important for investors to know financial ratios. This basic understanding can accelerate beginners into the world of advanced investing, as they start to understand all aspects of their investments.

You can bookmark this page (Ctrl + B in your web browser) so that you can reference the formulas in the future. We recommend that you review this page several times to retain your understanding of financial ratios.

Basic Financial Formulas

Below we've provided the basic financial ratio formulas that all investors need to know. These formulas are used along with a company's annual report to calculate their financial position.

Gross Profit Margin

Gross Profit Margin = (Revenue - Cost of Goods Sold)/Revenue

Net Profit Margin

Net Profit Margin = Net Income/Revenue

Return on Assets (ROA)

Return on Assets = Net Income/Total Assets

Return on Equity (ROE)

Return on Equity = Net Income/Shareholder's Equity

To learn more about these basic financial formulas, please visit the Ratios page. Here you'll find clear, concise definitions, along with an explanation of why these ratios are important for every investor.

Beyond Beginner Investing

Beginner investors can easily move onto advanced investing with the right educational resources and advice. On this site, you'll gain access to the necessary learning tools and online support to go beyond the world of beginner investing.

A beginner investor may ask "What are financial ratio formulas?" but an advanced investor will question "How can ratios make me a better investor?"

The answer is simple. Being an advanced investor means that you're investing more than just money - you're also investing time. Monitoring a company's financial ratios, and also the industry's averages, is the best way to stay on top of your investments and to know when it's time to buy and sell.

The Ultimate Investing Guide

Dan Fournier discusses each of these basic ratios in detail in his ultimate investment guide. You'll learn how to do financial ratio calculations as well as a ratio analysis of financial statements.

These skills are crucial for analyzing the financial position of your current investments.

To learn more about Fournier's guide, please visit the Ordering page on the left-hand menu. You can also continue learning about financial ratios by returning to the main Ratios page.

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Financial Ratio Formulas &Advanced Investing Strategies