A business reports historical, results of operations and financial position But investors and owners may need more information about how a company is performing, and ratio analysis is frequently the first way someone would go about analyzing financial information Ratio analysis can involve a comparison of items within a single year's financial statement, or a comparison of a ratio over a period of time (say five years), or a comparison of one or more ratio's of the company in question with that of a composite company in the same industry
A way of expressing relationships between a firm's financial numbers Ratios are most commonly used to analyze the financial and operational characteristics of a company in an industry, market, or region Ratios give managers a tool to conduct comparison and trend analysis
A tool used by analysts which utilizes the relationship between accounting figures and their trends over time to establish values and evaluate risks
A way of expressing relationships between a firm's accounting numbers and their trends over time that analysts use to establish values and evaluate risks
A comparison of relationships among account balances Ratios are most useful when compared with other entities and industry averages and when compared within a single entity over time
a method of analyzing a business by looking at its balance sheet and income statement