Conquering financial ratios: the good, the bad, and the who cares?

Business Credit | February 1, 1994| | Copyright

Ratio analysis of financial statements isn't a beanbag. But it needn't be Rubik's Cube either. Many of the ratios in use today subtract from rather than add to our analysis by obscuring the really important ratios and inviting unwarranted speculation on some of the others.

About 200 ratios are currently used by credit managers, bankers, and financial and investment analysts. A couple of handfuls of these are very useful; about the same number are useless or worse, they may give misleading impressions. The rest are like cold oatmeal ... they're not apt to do you much ...

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