Financial Ratios are calculated from one or more pieces of information from a company’s financial statement. A financial ratio is considered a useless piece of information, but it can give a financial analyst an excellent picture of a company’s situation and the trends that are developing. The ratio gains its utility by comparing it to other data and industry standards. The comparison can either be made by comparing the number to previous years or by comparing it to the numbers in the industry. The ratios are used to detect strengths and weaknesses, but can not answer all the questions that a company has about its financial needs.
Financial ratio analysis groups the ratios into categories which tell us about different facets of a comp
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