Learning Objective $17-$P$3$: Define and apply ratio analysis.

Skip to question

Ratio analysis provides clues to and symptoms of underlying conditions. Ratios, properly interpreted, identify areas requiring further investigation. A ratio expresses a relation between two quantities such as a percent, rate, or proportion. Ratios can be organized into the building blocks of analysis: $(1)$ liquidity and efficiency, $(2)$ solvency, $(3)$ profitability, and $(4)$ market prospects.