From the course: Finance for Non-Financial Managers
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What is financial ratio analysis?
From the course: Finance for Non-Financial Managers
What is financial ratio analysis?
- You can get a lot of information just by doing a simple thing. Divide one accounting number by another. - The results of these calculations are called financial ratios. - When it comes to financial ratio analysis, I like to borrow a quote from Winston Churchill. He said the following, "The farther backward you look, the farther forward you can see." - We analyze financial statements to tell us if a company has done well or poorly in the past, and to help us see how the company might do in the future. - Of course, it would be preferable if we could just get inside the company to do our analysis, but companies do not like outsiders poking around on the inside of their company. - [Instructor] There's just too much proprietary information that they do not want exposed to outsiders. Things like cost structures, pricing margins, and R&D efforts to name a few. - So we must make do with the information that's available. - Another point to keep in mind is that the analysis techniques that we…
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