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Evaluate the company's performance trend relative to liquidity, profitability and solvency.
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Business memo to General Manager, AC Speed Company
Ratio Analysis is a tool that is used to understand, record and analyse the financial health of an organization. It also proves to be a useful tool for comparative analysis for the same company across multiple periods or in comparing performance of multiple companies in a same period or over a period of time.
Ratio Analysis as a technique can be used to analyse multiple ratios which can be further divided into relevant groups like Liquidity, Profitability, Solvency, Leverage, Efficiency ratios, etc.
Liquidity, Profitability and Solvency ratios:-
Liquidity Ratios demonstrate the relative liquidity position of the company and its ability to pay off for its current Liabilities using its current assets.