Week 4 DQ 2

What are some common ratios used to analyze financial information? Which are the most important? What are some examples of how ratios are used in the decision making process?

Some of the common ratios used to analyze financial information are: profits, liquidity, activity, and debt leverage. Depending on the business and the sector it's in, personally, I'd have to say that liquidity and profits are of paramount importance.

Liquidity - The current ratio is calculated by dividing current assets: cash, receivables and inventory - by current liabilities, all debt obligations due within 12 months. The current ratio and quick ratio gauge a company's liquidity.

Also, for example, inventory turnover is total cost of goods sold divided by the average inventory level. The optimum...