Ratio analysis involves using numerical information from company financial statements to determine key relationships. It can be used to assess risk, estimate value, document trends, and conduct an evaluation of a company against similar companies in the same industry. Ratios for specific time periods may be evaluated against ratios from other time periods for both internal and external comparative purposes.
Common ratios include the quick ratio, current ratio, earnings per share ratio, debt to equity ratio, and price-earnings ratio. To find out more information about these ratios or ratio analysis consult a financial dictionary or glossary.