Financial Ratios PDF Print E-mail
Beloved of business analysts and accounts – certain key figures and ratios (and importantly the trends in those figures) may help you decide if your company is:
  • Moving in the right direction – expanding or contracting.
  • Liquid – do current assets exceed short-term liabilities?
  • Highly geared – are borrowings too high and is the company susceptible to fluctuations in economic conditions?
  • Solvent – is the bottom line balance sheet figure negative? This means that total liabilities are greater than total assets and the company is actually operating from an insolvent position.
When assessing ratios, it is important that the results are compared with other companies in the same industry and not to be taken in isolation. What may seem like a poor ratio at first glance may well be normal for that industry and, of course, the converse applies: what may seem a good ratio on its own might be below average for that industry.

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