Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Introduction to Ratios

Financial Accounting

14. Financial Statement Analysis

Introduction to Ratios

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Multiple Choice

A measurement of key relations between financial statement items is called ______ analysis.

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ratio

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Verified step by step guidance

Understand the concept of ratio analysis: Ratio analysis is a method used to evaluate relationships between different items in financial statements. It helps in assessing the financial health and performance of a company.

Identify the types of ratios commonly used: These include liquidity ratios, profitability ratios, efficiency ratios, and solvency ratios. Each type provides insights into specific aspects of the company's operations.

Learn how ratios are calculated: For example, the current ratio is calculated as \( \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} \). Similarly, other ratios have specific formulas based on the financial statement items.

Understand the purpose of ratio analysis: It is used to compare financial data over time, between companies, or against industry benchmarks to make informed decisions.

Apply ratio analysis in practice: Use the formulas to calculate ratios from financial statement data, interpret the results, and draw conclusions about the company's financial position and performance.