19
Financial Ratio Analysis
OBJECTIVES
To highlight the significance of financial ratio analysis
To explain and compute different types of liquidity ratios
To explain and compute profitability ratios
To elucidate and calculate ownership ratios
To pinpoint the limitations to ratio analysis
Once the financial statements are prepared, the figures therein must then be interpreted. The relationship between two sets of figures is established and on that basis, the necessary inference is drawn so as to bring about changes if necessary in the financial policy. The present chapter discusses this process which is also known as the financial ratio analysis.
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