3
Ratio Analysis for Financial Statements
Learning Objectives
By the end of this chapter, you should be able to:
• Name the four principal types of ratios and describe how they are used.
• Identify the four applications in which financial ratios are used.
• Explain the interrelationship of profitability, leverage, activity, and liquidity ratios.
• Apply a series of ratios to perform an intracompany, intercompany, and industry comparison analysis.
• Explain the importance of alternative asset management treatment.
• Explain the importance of alternative liability and equity treatment.
Positive Feedback and Some New Ideas
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