Plotting ratios

The gross margin ratio is an important profitability ratio that assesses a company's ability to earn profits from its sales. The asset turnover ratio is an important efficiency ratio that measures how efficiently a company is using its assets.

In this exercise, you'll plot and compute the gross margin and asset turnover ratio of Microsoft over time. This will help visually analyze the trend of these ratios for Microsoft: are these ratios constant, improving over time, volatile, or worsening? Let's find out!

Unlike using Seaborn to plot bar plots which we learned in the video, you will be using seaborn to make a line plot. Making a line plot with Seaborn only involves changing the sns.barplot to sns.lineplot. The rest of the arguments remain the same.

A DataFrame called msft has been loaded for you, along with pandas as pd and Seaborn as sns. You can run print(msft.columns) in the console to see the columns to use for this exercise.

This exercise is part of the course

Analyzing Financial Statements in Python

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Compute asset turnover ratio
msft["asset_turnover"] = msft[____] / msft[____]

# Compute gross margin ratio
msft["gross_margin"] = (____) / msft[____]

Edit and Run Code

This exercise is part of the course

Analyzing Financial Statements in Python

IntermediateSkill Level

4.6+

Start Course for Free

In this chapter, you will learn how to read and interpret a balance sheet and compute and use financial ratios to evaluate a company's performance using information from the balance sheet. Additionally, you'll gain hands-on experience using the powerful pandas data manipulation package to analyze a company's financial ratios and compare them to its peers in the industry.

Exercise 1: Introduction to the balance sheet Exercise 2: Match balance sheet items to their class Exercise 3: Relation of assets, liabilities, and shareholders' equity Exercise 4: Practice using the main equation of accounting Exercise 5: Financial ratios from the balance sheet Exercise 6: Match the ratio to its family Exercise 7: Compute the current ratio Exercise 8: Leverage ratios Exercise 9: Computing financial ratios using pandas Exercise 10: Compute current and debt-to-equity ratios Exercise 11: Compute relative difference by industry Exercise 12: Compute ratios by industry

In this chapter, you'll learn how to read and interpret an income statement, calculate key financial ratios, and even create your own functions in Python to automate repetitive tasks. You'll also gain experience using seaborn, a powerful data visualization library, to produce figures to help you understand a company's financial performance.

Exercise 1: Introduction to the income statement Exercise 2: Compute net income Exercise 3: Computing ratios from the income statement Exercise 4: Ratios from the income statement and balance sheet Exercise 5: Updating the user-defined function Exercise 6: Updating user-defined function to do subtraction Exercise 7: Computing ratios with user-defined function Exercise 8: Computing multiple ratios with the user-defined function Exercise 9: Visualizing ratios for within-company analysis Exercise 10: Plotting ratios

Current Exercise

Exercise 11: Plotting ratios in one figure

In this chapter, you’ll analyze the cash flow statement and use its information to compute and interpret financial ratios. Using Seaborn to create informative plots that compare financial ratios across different companies, you'll build on your existing knowledge of Python and data visualization. By the end of this chapter, you'll have the skills to extract insights from cash flow statements using Python and handle messy, real-world data sets with missing data.

Exercise 1: Cash flow statement Exercise 2: Assign cash flow entries to the correct part Exercise 3: Compute net cash flow Exercise 4: Financial ratios from the cash flow statement Exercise 5: Merging financial statements Exercise 6: Compute cash flow statement ratios Exercise 7: Imputing and filling in missing values using averages Exercise 8: Imputing missing values with percentiles Exercise 9: Merging financial statements and filling missing values Exercise 10: Visualizing financial ratios for comparison Exercise 11: Plotting cash flow ratios

In this chapter, you'll learn about the different financial ratios that measure a company's profitability, how to compute them, and how to compare them across other companies. You'll build upon your knowledge of the Seaborn library to create visualizations that help you analyze profitability ratios and identify trends.

Exercise 1: A glimpse into the financial ratios of some industries Exercise 2: Using margins in pivot tables and making a bar plot Exercise 3: Preparing data for a facet grid plot Exercise 4: Making a facet grid plot Exercise 5: User-defined function to make plots Exercise 6: Profitability metrics Exercise 7: Relationship between operating margin and debt-to-equity for real estate companies Exercise 8: Practice with sns.regplot()Exercise 9: Updating the user-defined function for plotting Exercise 10: More on analyzing profitability Exercise 11: Practice making heat maps Exercise 12: Broad analysis Exercise 13: Well done!