20 Key Financial Ratios - InvestingAnswers What the Top Financial Ratios Offer Investors and Analysts Key financial ratios allow analysts and investors to convert raw data (from financial statements) into concise, actionable information This information is used to used to: evaluate performance compare companies and industries conduct fundamental analysis Even though there are plenty of important financial ratios out there, investors
Intraday Definition Example | InvestingAnswers Based upon this analysis, they implement trading strategies and capitalize on short-term price fluctuations Intraday strategies are also used to trade options Option prices don’t change as quickly as underlying stock prices, so traders use intraday prices to identify periods when the option is mispriced relative to the stock
Intrinsic Value Definition Example | InvestingAnswers What is Intrinsic Value? Intrinsic value has two primary connotations in the finance world In the options-trading world, the term refers to the difference between the option 's strike price and the market value of the underlying security However, the most well-known usage occurs in security analysis, where intrinsic value is the perceived value of a security (which may differ from its market
Price Channel Definition Example | InvestingAnswers A technical trader might buy when a stock hits the lower limit of an upward-sloping price channel; similarly, traders might sell when a stock hits the upper limit of a downward-sloping channel [InvestingAnswers Features: Swing Trading 's 11 Commandments: Top Strategies for Technical Analysis]
Net Earnings | Definition Formula | InvestingAnswers Net earnings are one of the most closely followed numbers in finance, and this concept plays a major role in financial ratio analysis and financial statement analysis
Timeliness Definition Example | InvestingAnswers Timeliness is a ranking criterion of stocks based on the likely price performance of a stock over a short time period – usually less than 12 months
Key Reversal Definition Example | InvestingAnswers Edwards and Magee (authors of the highly regarded classic text -- Technical Analysis of Stock Trends) suggest waiting for the next key reversal in the opposite direction However, others look for the first challenge of a major resistance area that fails for a retest This could be a moving average, trendline, horizontal support or prior gap
Bottom Line Definition Example | InvestingAnswers The bottom line is one of the most closely followed numbers in finance, and it plays a large role in ratio analysis and financial statement analysis Shareholders look at the bottom line closely because it is the source of compensation to shareholders of the company, and if a company cannot generate enough profit to compensate owners, the value
Profit Loss Statement (P L) - InvestingAnswers That’s because profitability relates to stock and bond prices as it is factored into the P E ratio (price over earnings) Related: Financial Statement Analysis for Beginners How Profit and Loss Statements Relate to the Market A company’s ability (or inability) to generate earnings over the long term is the key driver of stock and bond prices