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9. CONCEPT ON RATIO ANALYSIS

Ratio analysis is the process of determining and interpreting numerical relationships based on financial statements. A ratio is a statistical yardstick that provides a measure of the relationship between two variables or figures. 
Fixed Assets to Net Worth is a ratio measuring the solvency of a company. This ratio indicates the extent to which the owners' cash is frozen in the form of fixed assets, such as property, plant, and equipment, and the extent to which funds are available for the company's operations (i.e. for working capital). 

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity.

The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity. 

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the total assets of a company (both liquid and illiquid) relative to that company's total liabilities. 

The Acid-test or Quick ratio or Liquidity ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately.

Quick Assets include those current assets that presumably can be quickly converted to cash at close to their book values. 


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