Ratio Analysis looks at the pairing of financial data in order to get a picture of the performance of the organisation

Ratios allow a business to identify aspects of their performance to help decision making

Ratio Analysis allows you to compare performance between departments and over time

Four different types of ratios can be used to measure:

1. Profitability – how profitable the firm is

2. Liquidity – the businesses ability to pay

3. Investment/shareholders – allows businesses to look at risk and potential earnings of investments

4. Gearing – looks at the balance between loans and shares in a business