Chapter 20

Financial Statement Analysis and the Tool Kit of the Analyst: III Ratio Analysis

Analysis continues with Ratio Analysis. It is a more focussed and comprehensive tool of analysis in that it establishes cause and effect relationships between either two items of balance sheet or of profit and loss account or both the balance sheet as well as profit and loss account.


This chapter seeks to enable you to develop knowledge and understanding of:

  1. Meaning, purpose and significance of ratio analysis.

  2. The classification/categorisation of ratios according to their functions and objectives into ROI, Solvency, Liquidity, Resources ...

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