7

Ratio Analysis

“Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage.”

 

Anonymous

LEARNING OBJECTIVES

After reading the chapter, you will be able to:

  1. Understand the concept and rationale of ratio analysis.

  2. Classify various types of ratios.

  3. Understand the calculation of different categories of ratios.

  4. Look at the limitations of ratios.

FINANCE IN PRACTICE

Bankruptcy is a legal procedure that is taken up when an individual or a firm is unable to pay off its business debts. When firms fail to pay off debts, they are liable to be sued by their creditors. The creditors can sue ...

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