BUSS1030 Lecture Notes - Lecture 9: Financial Ratio, Financial Statement, Quick Ratio

• School: University of Sydney
• Department: Business Studies
• Course: BUSS1030
• Professor: Steven Hitchcock

Document Summary

Week 9: analysis and interpretation of financial statements: Financial ratios provide a quick and relatively simple means of examining the financial health of a business. A ratio simply expresses the relationship between two figures appearing in the financial statements (e. g. profit in relation to capital employed) or perhaps some resource of the business (e. g. profit per employee, sales per square metre of counter space). Although ratios are not difficult to calculate, they can be difficult to interpret. They are only really the starting point for further analysis. They help to highlight the financial strengths and weaknesses of a business, but they cannot, by themselves, explain why certain strengths or weaknesses exist or why certain changes have occurred. Ratios can be expressed in various forms; for example, as a percentage, as a fraction, as a proportion. The way a particular ratio is presented will depend on the needs of those who will use the information.