Financial ratios: Meaning, calculation and application
Summary :
Table of Contents
- Introduction
- Financial statement analysis
- Comparative financial statement
- Comparative income statement
- Comparative balance sheet
- Common-size financial statement
- Ratio analysis
- Classification of ratios
- Liquidity ratios
- Leverage ratios
- Activity ratios
- Profitability ratios
- Bibliography
Abstract
A financial statement generally refers to the basis statements, which are as follows
i) The income statement
ii) The balance sheet
iii) Statement of retained earnings
iv) Statement of charge in financial position in addition to the above two statements.
financial statement analysis is the process of identifying the financial strengths and weaknesses of an organization as per the accounting reports and financial statements. The analysis is done by establishing a relationship between the items of the balance sheet and profit and loss account and the first task of a financial analyst is to determine the information that is relevant to the decisions under consideration from the available information in the financial statement. The second step is to arrange information to highlight a significant relationship. The third and the final procedure is interpretation and drawing of results and conclusions. Therefore financial analysis is the process of selection and understanding/evaluation of the accounting data/information.
i) The income statement
ii) The balance sheet
iii) Statement of retained earnings
iv) Statement of charge in financial position in addition to the above two statements.
financial statement analysis is the process of identifying the financial strengths and weaknesses of an organization as per the accounting reports and financial statements. The analysis is done by establishing a relationship between the items of the balance sheet and profit and loss account and the first task of a financial analyst is to determine the information that is relevant to the decisions under consideration from the available information in the financial statement. The second step is to arrange information to highlight a significant relationship. The third and the final procedure is interpretation and drawing of results and conclusions. Therefore financial analysis is the process of selection and understanding/evaluation of the accounting data/information.
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