ratio
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
. Explain the factors used in the formula, how the ratio assists the investor in evaluating a company’s performance, and whether it assesses liquidity, solvency, or profitability.
Expert Solution
Step 1
Ratio analysis is a technique of financial statements analysis. It is the most widely used tool to interpret quantitative relationship between two variables of the financial statements..
Ratio analysis is a study kf of relationship among various Financial factors in a business.
Investors can use ratio analysis easily & every figure needed to calculate the ratios is found on a company's financial statements( Profit and loss statements & Balance sheet ).
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