RATIO ANALYSIS

WHY?

Understanding Financial Health:
A Look at Ratio Analysis

What is Ratio Analysis?

Ratio analysis involves comparing different line items from our financial statements, such as the balance sheet and income statement, to reveal key metrics about our:

  • Liquidity: Our ability to meet short-term obligations with current assets.
  • Solvency: Our long-term financial stability and ability to repay debt.
  • Profitability: Our efficiency in generating profit from our operations.
  • Operational Efficiency: How effectively we utilize our resources to generate revenue.

Why is it Important?

By analyzing these ratios, we gain valuable insights into:

  • Our strengths and weaknesses: We can identify areas where we excel and areas where improvement is needed.
  • Trends over time: We can track our progress and measure the impact of our financial decisions.
  • Industry comparisons: We can benchmark our performance against our competitors and industry standards.

What Ratios Do We Use?

We utilize a variety of ratios categorized into the key areas mentioned above. Some common examples include:

  • Liquidity ratios: Current ratio, quick ratio, cash ratio
  • Solvency ratios: Debt-to-equity ratio, interest coverage ratio
  • Profitability ratios: Return on equity (ROE), return on assets (ROA), profit margin
  • Operational efficiency ratios: Inventory turnover ratio, receivable turnover ratio

Transparency and Trust

Presenting these ratios on our website demonstrates our commitment to transparency and open communication with our stakeholders. We believe that understanding our financial health fosters trust and confidence in our company’s future.