Finance Formulas / July 19, 2018 / Luz Tyson
Accounting ratios, also known as financial ratios, are used to measure the efficiency and profitability of a company based on its financial reports. They provide a way of expressing the relationship between one accounting data point to another, and are the basis of ratio analysis.
Companies fund their capital purchases with equity and borrowed capital. The equity capitalstockholders' equity can also be viewed as a company's net assets (total assets minus total liabilities). Investors contribute their share of (paid-in) capital as stockholders, which is the basic source of total stockholders' equity. The amount of paid-in capital from an investor is a factor in determining hisher ownership percentage.
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