Financial Ratio Analysis

Essay specific features

 

Issue:

Miscellaneous

 

Written by:

Kathryn G

 

Date added:

May 30, 2014

 

Level:

University

 

Grade:

A

 

No of pages / words:

2 / 516

 

Was viewed:

980 times

 

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Essay content:

In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit margin for a company of 25% is meaningless by itself...
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If we know that this company's competitors have profit margins of 10%, we know that it is more profitable than its industry peers which is quite favourable. If we also know that the historical trend is upwards, for example has been increasing steadily for the last few years, this would also be a favourable sign that management is implementing effective business policies and strategies...
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