14-10-2010, 04:54 PM
Purpose:
To identify aspects of a business’s performance to aid decision making
Quantitative process – may need to be supplemented by qualitative factors to get a complete picture
5 main areas:
1.Liquidity – the ability of the firm to pay its way
2.Investment/shareholders – information to enable decisions to be made on the extent of the risk and the earning potential of a business investment
3.Gearing – information on the relationship between the exposure of the business to loans as opposed to share capital
4.Profitability – how effective the firm is at generating profits given sales and or its capital assets
5.Financial – the rate at which the company sells its stock and the efficiency with which it uses its assets
for more details, please visit
http://www.bized.co.uk/educators/16-19/b.../ratio.ppt