Ratio Analysis Essay -- essays research papers

Companies strive from day to day to make their business publicly strong, financi all(prenominal)y strong, and appeasing and profitable for its shareholders. Shareholders as well as the go withs management use several tools to determine a partys health and direction. These tools are better known as proportionality analysis. Ratios are among the more widely used tools of financial analysis because they bid clues to and symptoms of underlying conditions.2 Ratios help measure a companys liquidity, activity, profitability, leverage and coverage.1 These five measured sections verbalise how ratio analysis is used in decision-making, how a firm bed measure its financial situation and financial performance, and the strengths and weaknesses of the company.The term ratio analysis can be broken megabucks into smaller sections. The first is a period ratio which is the ratio of modern assets to current liabilities. This ratio shows how well a companys current liabilities are covered.1 E ven though this ratio is used often, it does have its limitations. Since it shows all current assets it does not differentiate among the assets with regard to their degrees of liquidity, show it can show skued results .Another commonly used ratio is the acid-test ratio, also known as the tender ratio. This ratio shows an investor how the short-term liquidity, or how quickly the companys assets can be turned into cash.2 Inventory turnover is an important and often unnoted ratio that indicates inventory levels. A low turnover...