FINANCIAL STATEMENT ANALYSIS - RATIO ANALYSIS:

Select one financial analysis ratio and thoroughly describe the ratio in your initial post. It can be a ratio provided in the course content but does not have to be. Details to be included in your initial post are included in the "question" below.

QUESTION:

Thoroughly describe one ratio used in financial statement analysis. You should include the following information:

1. The name and definition of the ratio.
2. Type of ratio (liquidity, solvency, profitability, etc.).
3. How to calculate the ratio. You should include the formula as well as where the components of the formula can be found (i.e., current assets are found on the balance sheet). If a component of the formula is not found on a statement (for example, average total assets), tell how that component is calculated and where you get that information (i.e., an average of total assets found on the balance sheets at the end of the current and preceding years).
4. What the ratio is useful for.
5. How to interpret the ratio. Is a high ratio good? Is a low ratio better? Does it depend on the industry average? Etc.
6. Any additional information that you believe is beneficial in calculating, interpreting, or using the ratio you have selected.