Ratio analysis can be defined as a quantitative analysis of data obtained from the financial statements of a company. It assists in evaluating financial and operating performance , particularly in the context of efficiency, solvency, liquidity and profitability. It also provides a brief idea regarding the financial health of the company by comparing its performance over time. This, in turn, helps in assessing whether the company is improving or not. Never the less, the ratios can be categorized into six groups: liquidity ratios measuring the capability of the company in clearing off its short term debt obligations, then solvency ratios, comparing the company’s total amount of debts with its assets. Next profitability ratios which provide a clear and comprehensible picture regarding the generation of profits from the operations of the company. Also, efficiency ratios evaluate the proper usage of assets and liabilities of the company, while coverage ratios measure the ability o...
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