## 3.5 Ratio analysis

In the previous sections we looked at sources of finance and their suitability, used different methods of investment appraisal, defined working capital and prepared cash flow forecasts and explained the importance of budgets and calculated variances. We then constructed and explained final accounts and examined depreciation methods, intangible assets and stock valuation. We now move on to look at ratio analysis.

By the end of this section you should be able to:

- Calculate ratios
- Use the ratios to interpret and analyse financial statements from the perspective of various stakeholder

- Evaluate possible financial and other strategies to improve the values of ratios