Chapter 9
9. Introduction to Accounting Ratios
Ratios are tools that turn raw financial numbers into meaning. They show relationships between items in financial statements. Why use ratios 1. Measure performance- Is the business profitable/efficient? 2. Compare - Current year vs last year, or vs competitors 3. Makeicission Should we give credit? Should we invest? Formula pattern: Ratio = One item ÷ Another item. Answer can be %, times, or shillings.
9.1 Accounting Ratios
Quantitative analysis of financial statements to derive insights into a company's performance and financial health.
✓ They express the relationship between two or more accounting figures.
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