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RATIO ANALYSIS
What is ratio analysis in the context of banking and financial statement interpretation?
Ratio analysis is a quantitative technique used to evaluate the financial performance, liquidity, solvency, and profitability of a firm by computing relationships between two or more financial statement items. It enables comparison across periods and peer institutions.
What is the formula for calculating the Current Ratio?
Current Assets divided by Current Liabilities.
Which financial statements are primarily used to derive ratios in ratio analysis?
The Balance Sheet and the Profit & Loss Account (Income Statement) are the primary sources for computing financial ratios, and in some analyses the Cash Flow Statement is also used.
Which ratio measures a firm's ability to meet short-term obligations without selling inventory?
Quick Ratio or Acid Test Ratio.
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