Question

What is ratio analysis and different ratios in finance?

Answer 1

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's financial performance in several key areas. The ratiosare categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability Ratios, and Market Value Ratios.
There are three (03) important liquidity ratios.

Current Ratio. The current ratio (CR) is equal to total current assets divided by total current liabilities. ...

Quick asset Ratio. ...

Cash Ratio. ...

Average Collection Period. ...

Inventory / Stock Turnover. ...

Cash Conversion Cycle. ...

Fixed asset Turnover. ...

Total Asset Turnover.
A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financialstatements. ... Financial analysts use financial ratios to compare the strengths and weaknesses in various companies.

Answer 2

Explanation:

Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by studying its financial statements such as the balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity analysis.