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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes the process that involves the analysis of data to better solve business problems in the context of financial accounting ratios?

Double-entry bookkeeping

Depreciation calculation

Trial balance preparation

Ratio analysis

Previous problemNext problem

Verified step by step guidance

Understand the concept of ratio analysis: Ratio analysis is a financial accounting tool used to evaluate relationships between different financial statement items to assess a company's performance, financial health, and efficiency.

Identify the purpose of ratio analysis: It helps in analyzing data to solve business problems, such as determining profitability, liquidity, solvency, and operational efficiency.

Differentiate ratio analysis from other processes: Double-entry bookkeeping records transactions, depreciation calculation allocates asset costs over time, and trial balance preparation ensures debits equal credits. None of these directly involve analyzing data to solve business problems like ratio analysis does.

Recognize the types of ratios used in ratio analysis: Common ratios include profitability ratios (e.g., net profit margin), liquidity ratios (e.g., current ratio), solvency ratios (e.g., debt-to-equity ratio), and efficiency ratios (e.g., inventory turnover).

Apply ratio analysis in decision-making: Use the calculated ratios to identify trends, compare with industry benchmarks, and make informed business decisions to address financial challenges or opportunities.