Nature of Ratio Analysis:

Financial ratio is a relationship between tow accounting numbers. ratios help to make a 0ualitative
judgment about the firm’s financial performance.

 Financial Ratio

Financial (ratio is a relationship between two financial variables. It helps to ascertain the financial
condition of a firm.

Types of financial Ratios:

li0uidity ratios

leverages ratios

activity ratios

profitability ratios

Liquidity Ratio:

liquidity (ratio measure the firm’s ability to meet current obligations, and are calculated by
establishing relationships between current assets and current liabilities.

Leverage ratio:

leverage ratios measure the proportion of outsider’s capital in financing the firm’s assets, and is
calculated by establishing relationships between borrowed capital and e0uity capital.