What is Ratio Analysis?
                     
Introduction
Ratio analysis is a quantitative procedure of 
obtaining a look into a firm’s functional 
efficiency, liquidity, revenues, and 
profitability by analysing its financial records 
and statements. 
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2
PERFORMANCE
Ratio analysis can mark how a company is 
performing over time, while comparing a 
company to another within the same 
industry or sector.
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3
FINANCIAL 
HEALTH
While ratios offer useful insight into a 
company, they should be paired with other 
metrics, to obtain a broader picture of a 
company's financial health.
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4
Liquidity Ratios
These ratios evaluate a business’ efficiency 
to settle its debts as and when they become 
due, with its revenues or assets in the 
disposal. Liquidity ratios cover quick ratio, 
current ratio, and the working capital ratio.
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5
Solvency Ratio
Solvency ratios are also referred to as the 
financial leverage ratios. 
These ratios will compare an organization's 
level of debt with assets, earnings, and 
equity in order to determine the possibility of 
an organisation to stay in operation over an 
extended period of time by settling all its 
short and long-term debts and by paying 
coupon/interest regularly. 
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6
Profitability 
Prrofiatabtiliityo rastios indicate how efficiently a 
business will be able to generate revenues 
and profits through its operations. 
Profit margins, return on equity, return on 
assets, gross margin ratios, and return on 
capital employed are good examples of 
profitability ratios.
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7
Efficiency ratios
Efficiency ratios are also called as the 
activity ratios. These ratios determine the 
efficiency of a business by using its liabilities 
and assets to boost sales and optimise 
profits. 
Inventory turnover and turnover ratios are 
examples of efficiency ratios.
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8
Efficiency ratios
Efficiency ratios are also called as the 
activity ratios. These ratios determine the 
efficiency of a business by using its liabilities 
and assets to boost sales and optimise 
profits. 
Inventory turnover and turnover ratios are 
examples of efficiency ratios.
Source: cleartax.in
9
Thank you