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    Calculations and the Interpretations of Ratios

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    Discuss the importance of the calculation and interpretation of ratios to complete an effective financial ratio analysis.

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    Ratios are an integral part of a thorough, effective financial statement analysis. Financial ratios are segregated according to the financial aspect of the particular business that the ratio has measured. For example, activity ratios measure how quick a company can convert non-cash assets to cash, liquidity ratios measure how available the cash is to pay company debt. Profitability ratios will measure how the company is using assets ...

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    The solution discusses the importance of financial ratios in 273 words.