FROM Instructor:

Class, ratios are a key tool that I use, as a CFO, to monitor the health of my organization. Ratios for one year, one company, taken alone, do not make sense, kinda like letters do not make sense until put into words. The best use of ratios is to look at comparisons to other companies, and to look at trends in a single company's ratios over time. Ratios can also be used as benchmarks for improvement: for example, a company might work to improve its days' receivable ratio by making changes in their credit and collection policies, and then see if these changes made an improvement in the ratio. Ratio analysis is a way that financial managers, investors, shareholders, and other interested parties view and interpret a company's financial information. It "right sizes" financial information and makes it comparable between companies of different sizes. Ratios are a recipe, of sorts. While it is important to know how to calculate ratios, so you understand the components of each ratio and what it is measuring, there are many sites online that provide ratios and related data. My favorite online source to use is yahoo finance. If I want to dig deeper and prepare my own calculations, I use SEC.gov. I can download financial data into Microsoft Excel, and then use formulas in Excel for calculations. What is your thought?