There are basically 5 categories of financial statement analysis that are employed to assess the health of companies related to their financial performance. They are generally classified as liquidity, efficiency, debt, profitability and market-based ratios.
Select 1 of the categories, and discuss the following:
- What does each ratio in the category attempt to measure?
- What individual ratios does it employ?
- List at least 3.
- Discuss each of the ratios that you have identified.
- How is each calculated?
- What does each measure?
- What is the general rule of thumb associated is ratio?
- How do you know if a ratio is improving or deteriorating?
- And what are some of the weaknesses or limitations of each ratio?