Ratio analysis

Definition

Ratio analysis is a quantitative method used in analyzing a company's financial statements to evaluate its performance, financial health, and liquidity. It involves calculating various ratios from the financial data to compare against industry benchmarks or historical data of the company.

Related terms

Liquidity Ratios: These measure a company's ability to meet its short-term obligations using its current assets.

Profitability Ratios:

These indicate how well a company can generate profit relative to its revenue, equity, and other financial metrics.

Debt Ratios: These assess a company's leverage by comparing its total debt to its assets or equity, indicating the level of risk associated with its debt load