Briefly explain what a ratio analysis is in 1-2 paragraphs. Cite your resources.
Ratio analysis is the measurement of the magnitude of two finance variables in a proportional manner. It defines the financial position of the business. Several financial ratios are explained as follows:
a. Liquidity ratios
b. Solvency ratios
c. Leverage ratio
d. Turnover ratios
e. Profitability ratios
The external users such as creditors, shareholders , govt and other parties who are interested in the financial positions of the business uses the ratios and interpret the results for their further analysis in the future course of business.
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