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Article: Accounting ratios.(Checklist 192)
- Article from:
- Chartered Management Institute: Checklists: Managing Information and Finance
- Article date:
- October 1, 2005
CopyrightCOPYRIGHT 2005 Chartered Management Institute. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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[check] This checklist offers guidance on understanding and interpreting accounting ratios. An understanding of the significance of such ratios will enable a clearer appreciation of the financial performance of a company and will provide a more balanced view of the figures presented in any financial report.
Definition
An accounting ratio is the comparison of two figures in a set of accounts. Sometimes it may be expressed as a ratio (as in 1:2) and sometimes as a percentage. Some accounting ratios are well known and frequently used, but you are free to calculate and use ratios that are relevant to your particular needs.
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