A ratio analysis is a quantitative analysis of information contained in a company's financial statements. Ratio analysis is used to evaluate various aspects of a company's operating and financial performance such as its efficiency, liquidity, profitability and solvency.
Also, what is the meaning of financial ratios?
A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Why do we use financial ratios?
Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed.
What is the most important financial ratio?
15 Financial Ratios Every Investor Should Use
- 1) Price-to-Earnings Ratio (P/E)
- 2) PEG Ratio.
- 4) Price-to-Book Ratio (P/B)
- 5) Dividend Yield.
- 6) Dividend Payout Ratio.
- 7) Return on Assets (ROA)
- 8) Return on Equity (ROE)
- 9) Profit Margin.