Assessing financial health

3.1 Introduction

Financial ratios are the primary tools for the analysis of financial statements which provides the basis for valuing a business and appraising its financial health.

This chapter introduces these concepts in a framework which will be used throughout the book. The financial statements of Daimler-Chrysler, reviewed in Chapters 1 and 2, will form the example for this chapter.

A summary of the ratios dealt with in this chapter is presented in Appendix 3A at the end of the chapter.

3.2 Financial ratios

Tables 3.1 to 3.3 report summary financial statements for Daimler-Chrysler. The income statement and cash flow statements in Tables 3.2 and 3.3 respectively, present data in detail for three years and partially ...

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