Financial ratios are important to the understanding of the financial health of a company. You and your colleagues work for a financial services firm. You are discussing the merits of the various financial ratios. Identify 4 financial ratios, and state what they tell you about a firm and why it's important to understand what these ratios mean to both a bank and an investor. Be sure to include your reasoning regarding these issues.
Choose 4 different financial ratios.
Answer the following questions:
- What do they tell you about a firm?
- Why is it important for a bank to understand these financial ratios?
- Why is it important for an investor to understand these financial ratios?
The solution provided includes the current ratio, the debt-equity ratio, the net profit margin and the earning per share selected as the four different financial ratios. 2 references are noted with 548 words total.