Cross sectional ratio analysis. Introduction: Financial ratio analysis: It is a tool of financial analysis that represents the relationship between two or more items of the financial statement. It can be divided into following areas. Liquidity Ratios: The liquidity ratios gives the idea of whether the company can settle its liabilities or short term obligations, which has less than one year maturity. Activity ratio: An activity ratio assesses the efficiency of a firm in converting various accounts into cash or sales. Debt ratio: It is the degree of indebtedness that is the firm’s amount of debt financing and its ability to meet fixed charges. Profitability ratio: The profitability ratio focuses on the ability of the firm to make a profit on sales, assets or equity and shows the total effect of other ratios on the operating results.

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Chapter 3, Problem 3.23P

a)

Summary Introduction

To discuss: Cross sectional ratio analysis.

Introduction:

Financial ratio analysis: It is a tool of financial analysis that represents the relationship between two or more items of the financial statement. It can be divided into following areas.

Liquidity Ratios: The liquidity ratios gives the idea of whether the company can settle its liabilities or short term obligations, which has less than one year maturity.

Activity ratio: An activity ratio assesses the efficiency of a firm in converting various accounts into cash or sales.

Debt ratio: It is the degree of indebtedness that is the firm’s amount of debt financing and its ability to meet fixed charges.

Profitability ratio: The profitability ratio focuses on the ability of the firm to make a profit on sales, assets or equity and shows the total effect of other ratios on the operating results.

b)

Summary Introduction

To discuss: Summarising the findings.

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