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How are financial ratios and trend analysis used to analyze and interpret financial statements? Which category (profitability, efficiency, liquidity, gearing, or investment) of ratios is most useful for company managers and why?

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How are financial ratios and trend analysis used to analyze and interpret financial statements?

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Financial ratios are key tools in evaluating the financial statements and performance of an organization for a given period. To complete a thorough examination of a company's effectiveness, one needs to look at more than just easily attainable numbers like sales, profits, and total assets.One must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible.

This massive data overload could seem staggering. However, ratio analysis makes this task very simple. Comparative ratio analysis, ie, comparison of ratios ...

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