Tag: Financial ratios
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Financial ratios: What do they mean? (Part 3)
Ratio analysis can be used when financial information needs to be simplified to make it possible to interpret and compare the information. Banks often do ratio analysis when they need to decide whether to lend money to a client or not. If a business wants to open an account with a supplier, the suppliers often […]
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Financial ratios: What do they mean? (Part 2)
The purpose of ratio analysis is to simplify the financial situation of a business by looking at the relationships between different categories of accounting data. The amounts used in ratio analysis will normally be read from a set of financial statements. Two important limitations of ratio analysis which must be kept in mind are: Two […]
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Financial ratios: What do they mean? (Part 1)
The purpose of calculating ratios is to get a bird’s eyeview of the financial situation of a business by analysing the relationships between different amounts on the financial statements. The major advantages of using ratio analysis is that it simplifies the information in the financial statements and allows you to compare the ratio results over […]