What have you actually learned to read?

You started this course able to open a financial statement and see big, meaningless numbers. You finish able to turn those numbers into structured judgement. Before the checkpoint quiz, let's assemble the whole toolkit in one place — this is your reference map.

The four questions and their ratios

Everything you learned answers one of four plain questions about a business:

• Is it profitable? Gross / operating / net margin (profit per sales dollar); ROA and ROE (profit per asset and per owner dollar). Higher isn't automatically better — margins belong to industries.
• Can it pay short-term bills? Current ratio and the stricter quick ratio (short-term resources vs short-term obligations). And the deeper check: does operating cash flow back up reported profit?
• Can it survive its debt? Debt-to-equity (size of the borrowing) and interest coverage (ability to carry it). Leverage deepens losses always, and lifts gains only when the assets earn more than the debt costs.
• Does it use its resources well? Asset, inventory and receivables turnover, and the cash conversion cycle — efficiency measured in dollars and days.

The tree that ties it together

DuPont decomposes ROE into margin × turnover × leverage — profitability, efficiency and borrowing in a single line. It's why the same 20% ROE can mean a great business or a heavily indebted one, and it's the reason this course covered all three.

The disciplines that keep you honest

• Compare fairly — against the company's own history, its direct peers, and the industry norm; never across unlike industries, accounting choices, or one-off years.
• Read ratios together — health is a pattern where readings agree, and the alarms ring where they contradict (profit up, cash down).
• Watch for painted numbers — profit outrunning cash, receivables outrunning revenue, capex outrunning revenue while free cash flow lags profit, recurring "one-off" adjustments: red flags are questions to investigate, never conclusions.
• Respect the limits — ratios look backward and miss brand, management and moat. They ask better questions; they don't answer them.

The mindset you're carrying forward

Every ratio here is an observation, never a recommendation, prediction, or verdict. You've learned to describe a company's financial health carefully and comparatively — and to stay honest about what the numbers can and can't show. That stance is the heart of fundamental analysis, and it's what the next course builds on when it turns from health to value — what a company is actually worth.

Before you sit it

Each of these is a minute at your desk. Any one that is not names the lesson to reopen first.

• Say what each of the three margins has already subtracted — What do gross, operating and net margin each tell you?
• Say what the quick ratio removes from the current ratio, and why — Can this company pay its bills next year?
• Name the three parts ROE breaks into — Where does ROE actually come from?
• Name one thing no ratio will ever tell you — What can ratios never tell you?

Try it now

Before the checkpoint quiz, prove the toolkit to yourself:

One filing, three tables, the whole toolkit.

1. Answer all four questions with one ratio each, taking every figure from the tables above: net margin, current ratio, debt-to-equity, asset turnover.
2. Run the DuPont split — margin × turnover × equity multiplier — and check that it lands on net income ÷ total shareholder equity. Then name which of the three factors is doing most of the work.
3. Write one honest, comparative sentence about the company's health — an observation, not a call.
4. Now do it unaided on a company of your own. All three statements are on the Terminal's fundamentals tab; the link opens Coca-Cola, and you change the symbol:

Open KO.US — fundamentals in the EODHD Terminal

If you can do that, you have earned this checkpoint.