How to interpret ratio analysis?
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If you are a finance nerd, please skip this article. We know you guys can read between numbers but this for some people like us who need simplification.
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Ratio analysis is a snapshot of how a company performs in a particular time frame. These results are used by financial analysts, equity research analysts, investors and asset managers to make better investment decisions.
Types of Ratios:
Liquidity Ratios
These ratios measure whether the company will be able to repay its short-term debt obligations.
Efficiency ratios
These ratios measure how well a company utilizes its assets and resources.
Solvency Ratio
These ratio measures how the long-term funds are used in the company.
Profitability Ratio
These ratios measure how efficiently a company generate profit and value for shareholders from its sales/operation, balance sheet assets, or shareholder’s equity.
We hope you guys have understood about ratio analysis and its types.
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