A ratio is calculated from two or more figures, usually taken from the financial statements of a company, in order to provide an indication of the financial performance and position of that company. Ratios may be expressed:
Ratios may also be calculated over a period, so as to enable an analysis of trends to be formulated, or compared to other similar companies or industry averages.
Every department in every business produces some kind of information that can be used by its manager to measure performance. This information may be related to operational considerations within the department, the financial condition of the entire company, or the performance of a company's suppliers and customers.
The words ratios, averages, and benchmarks are sometimes used interchangeably.
Try the eBook Business Ratios and Formulas: A Comprehensive Guide to find formulas.
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