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Get Started in Shares by Glen Arnold

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Key ratios and measures

The idea behind this section is to allow you to analyse a company by focusing on those elements that seem particularly important to you. The value of these ratios and other measures is that they help to put into perspective the numbers reported in the profit and loss account, balance sheet and cash flow statements. They often relate one aspect of the accounts (e.g. profits) to another (e.g. the value of all the assets the company is using).

As well as displaying the relationship between pairs of figures and permitting comparison with other companies, they allow an investor to develop a more informed perspective on the firm’s performance and financial standing across time. The way in which ratios change over a period of ...

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