What are some key financial ratios that would be useful in evaluating strategy for your organization and why?

Wouldn't that depend on the organization?

I will be happy to critique your thinking .

You are correct, the key financial ratios that are useful in evaluating strategy can vary depending on the organization's industry and specific circumstances. However, there are some common financial ratios that can provide valuable insights when evaluating a company's strategy. Here are a few examples:

1. Profitability Ratios: These ratios measure a company's ability to generate profits relative to different aspects of its operations. Examples include Gross Profit Margin, Operating Profit Margin, and Net Profit Margin. These ratios give an indication of a company's profitability and efficiency in managing costs.

To calculate profitability ratios, you need to gather the relevant financial data from the company's income statement and divide specific income or profit figures by relevant revenue or cost figures. For example, Gross Profit Margin is calculated by dividing gross profit by revenue and multiplying by 100.

2. Liquidity Ratios: These ratios assess a company's ability to meet its short-term obligations. Examples include Current Ratio and Quick Ratio (also known as Acid-Test Ratio). These ratios help determine if a company has enough assets readily available to cover its short-term liabilities.

To calculate liquidity ratios, you need to gather the relevant financial data from the company's balance sheet and divide specific asset or liability figures to get the ratio. For example, Current Ratio is calculated by dividing current assets by current liabilities.

3. Leverage Ratios: These ratios analyze the level of debt a company has taken on and its ability to meet debt obligations. Examples include Debt-to-Equity Ratio and Interest Coverage Ratio. These ratios help assess the company's financial risk and stability.

To calculate leverage ratios, you need to gather the relevant financial data from the company's balance sheet and income statement. Debt-to-Equity Ratio is calculated by dividing total debt by total equity. Interest Coverage Ratio is calculated by dividing earnings before interest and taxes (EBIT) by interest expense.

4. Efficiency Ratios: These ratios measure how effectively a company utilizes its resources to generate revenue. Examples include Inventory Turnover, Accounts Receivable Turnover, and Fixed Asset Turnover. These ratios help assess a company's operational efficiency and productivity.

To calculate efficiency ratios, you need to gather the relevant financial data from the company's balance sheet and income statement. For example, Inventory Turnover is calculated by dividing the cost of goods sold by average inventory.

When evaluating strategy for an organization, it is important to analyze these financial ratios along with other qualitative factors such as market trends, competitive dynamics, and internal capabilities. The specific financial ratios to focus on will depend on the organization's objectives, industry norms, and the key drivers of its profitability.