Accounting is widely referred to as “the language of business”, and it is important to understand accounting for the effective management of a company. Accounting ratios (also referred to as ‘financial ratios’ or ‘ratio analysis’) is a way of measuring the financial performance of a company in comparison to other companies.
The performance ratios do not mean a lot on their own, however they become extremely useful when compared against the ratios of the company’s competitors, or the industry as a whole.
For example if a company within the automotive industry wants to compare their levels of debt to other companies within the industry, it will be able to assess certain ratios which measure debt levels and it can compare these against specific competitors or the whole industry. From here the company will be able to identify strengths and weaknesses of the business, and it will be able to use this information to make planning decisions for the future.
In essence it is a simple way to gauge the financial health of the business, and it can be an integral part of the planning and analysis procedure for a company.
At Key Note we provide the ratios which have already been calculated by using the company figures which are provided by our data suppliers. The Key Note website has many features that enables the user to easily compare the ratios of one company against the figures of any other companies that the user wants to compare against.
Please click our FAQ articles listed below for details of the different Financial Ratios.