Financial Ratio Analysis


Financial Ratio Analysis is a useful tool for detecting the company's strengths and weaknesses - many stakeholders use it to make important decisions when it comes to investments. The concept reviews the most essential elements and applications of Financial Ratio Analysis, along with its strengths and weaknesses.

Technique Overview

Financial Ratio Analysis

Financial Ratio Analysis Definition

As financial statements contain a huge amount of data, financial analysts condense this data into a manageable form by calculating a small number of key financial ratios (Brealey and Myers, 2003). These ratios are classified into different types focused on different analysis perspectives - this is due to the fact that every stakeholder will have different objectives and expectations, requiring different analysis points of view (Moyer et al., 2008). The different groups are liquidity, asset management (or efficiency), financial leverage, profitability, market-based and dividend policy ratios.

Financial Ratio Analysis Description *

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Business Evidence

Strengths, weaknesses and examples of Financial Ratio Analysis *

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Business Application

Implementation, success factors and measures of Financial Ratio Analysis *

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Professional Tools

Financial Ratio Analysis videos and downloads *

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Further Reading

Financial Ratio Analysis web and print resources *

Financial Ratio Analysis references (4 of up to 20) *

  • Baker, H.K. and Powell, G.E. (2005) Understanding Financial Management: A Practical Guide. John Wiley and Sons.
  • Barthwal, R.R. (2007) Industrial Economics: An Introductory Text Book. New Age International.
  • Biery, M.E. (2011) Which Retailer Type is Most/Least Profitable? Forbes, 11 November. Available at: [Accessed on 12 December 2011].
  • Brealey, R.A. and Myers, C. (2003) Financing and Risk Management. McGraw-Hill Professional.

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