ratio analysis
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Related to ratio analysis: Financial ratios
Ratio analysis
Ratio Analysis
The study of the significance of financial ratios for a company. Ratio analysis is very important in fundamental analysis, which investigates the financial health of companies. An example of ratio analysis is the comparison of price-earnings ratios of different companies. This helps analysts determine which companies' share prices properly reflect their performances and therefore what investments are most likely to be the most profitable.
ratio analysis
A study of the relationships between financial variables. Ratios of one firm are often compared with the same ratios of similar firms or of all firms in a single industry. This comparison indicates if a particular firm's financial statistics are suspect. Likewise, a particular ratio for a firm may be evaluated over a period of time to determine if any special trend exists. Compare trend analysis. See also horizontal analysis, vertical analysis.