ratio analysis

Definition:
An approach to the analysis of financial information which allows management to monitor changes in the performance of their company from one period to the next or to compare it with other companies. Typical ratios which are calculated and compared include profit/capital employed or current assets/current liabilities. More detailed evaluation of ratios such as production costs/sales turnover, administration costs/sales turnover and selling costs/sales turnover can be used to indicate the relative efficiency of the company in each functional area and changes in that efficiency over time.

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