What are some of the must use financial ratios when evaluating a company?

1) Gross margin
A high gross margin would indicate pricing power and possibly an economic moat.

2) Net income margin
A high net income margin provides a buffer in case revenue drops or costs go up. A low net income margin business will easily be in the red due to small fluctuations in revenue.

3) Operating cashflow
Positive operating cashflow tells you that the business is sustainable in the long run.

4) Revenue growth
A growing business should have revenue growth otherwise it is a sign of a mature or declining business.

5) Earnings Per Share growth
Earnings per share growth should increase due to net income growth or share buybacks. That would be a sign of a healthy business.

Perhaps just to take a step back there has to be an understanding when these ratios mentioned by Sandra and Vineeta are to be used. Here are some considerations:

1) Some ratios cannot be applied to certain industries (i.e. inventory turnover rate used for products and goods but can't be used for the services industry)

2) Ratios used on a single company does not show anything if it's not in comparison with its competitors, but then again, how does one exactly identify a direct competitor? Some may be in the same field but ventures into aspects not ventured by the company you are measuring of (i.e. Capitaland and City Developments, the former has malls and residential, but the latter's portfolio is majority made up of hotels, so should it be compared to other similar sized companies that comprises majority of hotels also? i.e. UOL . Hence one needs to be aware of the 'right' companies to compare these ratios with