Popular Courses
COMM 217
Concordia University
ACCT 2301
The University of Texas at Dallas
Intro to Financial Accounting
General Course
COMM 293
University of British Columbia
Intro to Financial Accounting
University Study Guides
MGCR 211
McGill University
ACCT 1220
University of Guelph
Intro to Financial Accounting
University Study Guides
ACCT 217
University of Calgary
ADMS 2500
York University
COMMERCE 1AA3
McMaster University
ACCTG 211
University of Alberta
ACC 100
Toronto Metropolitan University
ADM 1340
University of Ottawa
RSM219H1
University of Toronto
COMM 1101
Dalhousie University
AFM 101
University of Waterloo
BUS 251
Simon Fraser University
AFA 100
Toronto Metropolitan University
BUSINESS 3321K
Western University
0:00 / 0:00
Ratio Analysis
Financial ratios are used to measures financial performance and to identify strengths and weaknesses within a businesses operations. Ratios allow us to compare a business to another, or to its self at a different point in time.
Profitability Ratios
- Measures the businesses capability of turning a profit
- Measures the ability to generate revenues and manage costs
- Higher is better
Liquidity Ratios
- Measures ability to meet short-term obligations
- Measures ability to create cash without liquidating assets, taking on debt or issuing equity
- Higher ratios means the business is less likely to miss payments
Solvency Ratios
- Measures ability to meet long-term obligations
- Higher ratio means the business is less likely to default on debts
Practice: Ratio Analysis
Answer the following multiple choice questions.
Which category of ratios measures a company's ability to pay off long-term debt like bonds and notes?