Abstract
Ratio analysis is a diagnostic tool that helps to identify problem areas and opportunities within a company. Financial expert shall use ratios with caution, as there is considerable subjectivity involved, in their computation. More, ratios may not be strictly comparable for different firms due to a variety of factors such as different accounting practices, policies, and the level of risks accepted by the management. Furthermore, if a firm is engaged in diverse product lines, it may be difficult to identify the industry category to which the firm belongs.
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Notes
- 1.
The financial leverage coefficient ratio is: ROE% / ROA%. A coefficient of more than 1 is considered positive.
- 2.
Segment reporting is required for publicly held entities and is not required for privately held ones.
- 3.
Grahame Steven (2006): Financial Management, September 2006, Papers P1, P2, and P3.
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Lessambo, F.I. (2018). Financial Ratios Analysis. In: Financial Statements. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-99984-5_17
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DOI: https://doi.org/10.1007/978-3-319-99984-5_17
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