CHAPTER THREE

Finding Meaning inFinancial Statements

A Look Behind the Numbers

Key Topics Covered in This Chapter

What ratio analysis is, why it is useful, and what its limits are

How various types of ratios work—including profitability, activity, and solvency ratios

How to compare different companies’ financial statements

IN THE LAST CHAPTER, you learned about the three key financial statements and their various components. In chapter 3, you’ll discover tools for interpreting those statements and assessing your company’s business performance. With this added layer of understanding, you can gain further insights into how your HR department might improve the firm’s bottom line.

Ratio Analysis

Many people use financial statements, and often ...

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