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Financial ratios


1. Specifically, measures of creditworthiness. The principal measures are the current ratio, the debt or net worth ratio (long-term debt to net worth), dividend cover, interest cover and the net tangible assets ratio (total tangible assets less current liabilities and minority interests to long-term debt). All these ratios are measures of the asset or income cover available to the suppliers of capital to the business. 2. Generally calculations based on company accounts and other sources, such as stock exchange share prices, designed to indicate the profitability or other financial aspects of a business, e.g. return on net assets, price-earnings ratio and stock-sales ratio.

Reference: The Penguin Dictionary of Economics, 3rd edt.