{"id":278507,"date":"2026-10-14T17:34:32","date_gmt":"2026-10-14T12:04:32","guid":{"rendered":"https:\/\/imarticus.org\/blog\/?p=278507"},"modified":"2026-10-19T11:35:04","modified_gmt":"2026-10-19T06:05:04","slug":"ratio-analysis","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/ratio-analysis\/","title":{"rendered":"Ratio Analysis: Meaning, Types, Formulas and Examples"},"content":{"rendered":"\r\n<p><style>\r\n  .wrap {\r\n    margin: 24px 0;\r\n    width: 100%;\r\n    box-sizing: border-box;\r\n  }\r\n  .card {\r\n    box-sizing: border-box;\r\n    width: 100%;\r\n    max-width: 720px;\r\n    margin: 0 auto;\r\n    background: #eaf6ec;\r\n    border: 1.5px solid #b0dabb;\r\n    border-radius: clamp(16px, 3vw, 26px);\r\n    padding: clamp(22px, 4.5vw, 44px);\r\n    text-align: center;\r\n    font-family: 'Manrope', Arial, Helvetica, sans-serif;\r\n  }\r\n  .card * {\r\n    box-sizing: border-box;\r\n  }\r\n  .badge {\r\n    display: block;\r\n    text-align: left;\r\n    margin: 0 0 10px 0;\r\n    color: #2f7a4d;\r\n    font-weight: 800;\r\n    font-size: 15px;\r\n    letter-spacing: 0.04em;\r\n    text-transform: uppercase;\r\n  }\r\n  .card p {\r\n    font-size: clamp(14.5px, 1.8vw, 16.5px);\r\n    line-height: 1.7;\r\n    color: #2c3e33;\r\n    margin: 0;\r\n    text-align: left;\r\n    overflow-wrap: break-word; \/* Prevents long text from pushing width *\/\r\n  }\r\n  .card strong {\r\n    color: #1f3d2a;\r\n    font-weight: 700;\r\n  }\r\n<\/style><\/p>\r\n<div class=\"wrap\">\r\n<div class=\"card\">\r\n<div class=\"badge\">Summary<\/div>\r\n<p>Ratio analysis is a way of analysing a company&#8217;s finances by comparing two related numbers from a company&#8217;s financial statements, such as the balance sheet, profit and loss statement, or cash flow statement, in order to determine the company&#8217;s performance, financial health, and efficiency. There are five major ratios, which are liquidity, profitability, solvency, activity and market value ratios. They are compared to previous years and industry benchmarks to identify trends, strengths, and risks.<\/p>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">A company reports a profit of \u20b910 crore. Is that a lot? It depends on what it took to earn it. If the company used \u20b950 crore of assets, that\u2019s a 20% return, and it\u2019s making its money work hard. The profit figure on its own can\u2019t tell you this, but a ratio can.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Honestly, this is where I begin with nearly every company I look at. Ratio analysis isn&#8217;t hard, even if you&#8217;ve never studied finance. In this blog, you&#8217;ll find what it means, the main types, the formulas with small examples, and a few places where it can trick you. Want to try it on real company data once you&#8217;re done reading? Our <a href=\"https:\/\/imarticus.org\/financial-analysis-prodegree\/\"><strong>Financial Analysis ProDegree<\/strong><\/a> lets you do exactly that through live case studies.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Ratio Analysis Meaning\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Suppose that someone gives you a balance sheet and asks you if the company is OK. What do you do, where do you look? The majority of analysts directly jump to ratios. Therefore, what is ratio analysis? Simple. You choose two numbers from the financial statements of a company that are related and make a comparison. The result is an indication of the performance of the company, its riskiness, and its resource efficiency. The answer comes out as a percentage or a small number, as you can see, making it easy to compare year-on-year or between companies.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Remember exam marks? Scoring 450 doesn&#8217;t mean much till somebody tells you the paper was for 500. Say 90%, and everybody gets it. The meaning of ratio analysis is that same idea, only with rupees. A \u20b950 lakh profit is just a number. A 10% profit on sales actually says something.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>Ratio Analysis in Accounting<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">In accounting, ratio analysis means reading the balance sheet, the profit and loss statement, and the cash flow statement by connecting one line to another. Some examples:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>Net profit to sales:<\/strong> out of every rupee you sell, how much do you actually keep?<\/li>\r\n\r\n\r\n\r\n<li><strong>Current assets to current liabilities:<\/strong> can you pay short-term bills when they fall due?<\/li>\r\n\r\n\r\n\r\n<li><strong>Debt to equity:<\/strong> how much of the business runs on borrowed money?<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What is Financial Ratio Analysis?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The ratio analysis meaning stays the same here, but financial ratio analysis is the version people use to make actual calls. Investors pick shares with it. Banks look at it before they lend. Managers use it to find what&#8217;s broken inside their own business. In my experience, one well-chosen ratio can change the mood of a whole review meeting, because suddenly everyone is talking about a fact and not somebody&#8217;s opinion.\u00a0<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Want to go deeper into individual ratios? Our guide on <a href=\"https:\/\/imarticus.org\/blog\/accounting-ratios\/\">accounting ratios<\/a> is a good one to keep open.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>How Ratio Analysis Works<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ratio analysis looks complicated until you break it down. In practice, it comes down to five steps:<\/p>\r\n\r\n\r\n\r\n<ol class=\"wp-block-list\">\r\n<li><strong>Collect the statements.<\/strong> Balance sheet, profit and loss statement, and the cash flow statement if your question needs it. Try to have three years of numbers.<\/li>\r\n\r\n\r\n\r\n<li><strong>Pick the figures.<\/strong> Just the items each ratio uses: sales, inventory, equity, and so on.<\/li>\r\n\r\n\r\n\r\n<li><strong>Choose the ratios.<\/strong> Worried about cash? Look at liquidity. Want to judge returns? Go for profitability.<\/li>\r\n\r\n\r\n\r\n<li><strong>Calculate.<\/strong> Divide one shape into another. Don&#8217;t change the format from year to year, or the comparison will not be meaningful.<\/li>\r\n\r\n\r\n\r\n<li><strong>Compare and interpret.<\/strong> Put the result against earlier years, competitors, and industry norms. Then write down what you think it means.<\/li>\r\n<\/ol>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">People skip the last step all the time, and it&#8217;s the most useful one. By itself, a ratio is only a number. Set it beside last year&#8217;s, a rival&#8217;s, and the industry average, and now it tells you something. Use all three comparisons if you can.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>What are the Objectives of Ratio Analysis?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Nobody works out ratios just for fun. There\u2019s always a question sitting behind the sums. Here\u2019s what ratio analysis helps you find out:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>Can the company pay its bills?<\/strong> Salaries, supplier dues, and short-term loans all fall due soon. Liquidity ratios like the current ratio and quick ratio show if there\u2019s enough cash and near-cash to cover them.<\/li>\r\n\r\n\r\n\r\n<li><strong>Is the business actually making money?<\/strong> High sales don\u2019t always mean high profit. A shop can sell \u20b91 crore of goods and still keep very little. Profitability ratios show how much of the sales, assets, and capital turns into real profit.<\/li>\r\n\r\n\r\n\r\n<li><strong>Can it handle its debt?<\/strong> A company may look fine today but struggle if it has borrowed too much. Solvency ratios show whether it can repay long-term loans and keep paying interest, even in a slow year. This is the first thing a lender checks.<\/li>\r\n\r\n\r\n\r\n<li><strong>Is it using its resources well?<\/strong> Stock piling up in the warehouse or customers paying late can quietly drain a business. Activity ratios show whether the company\u2019s assets are working hard or just sitting there.<\/li>\r\n\r\n\r\n\r\n<li><strong>How does it compare?<\/strong> One year\u2019s number is hard to read on its own. Put it next to last year\u2019s, a rival\u2019s, and the industry average, and it starts to mean something.<\/li>\r\n\r\n\r\n\r\n<li><strong>Is trouble coming?<\/strong> A margin that slips a little every quarter is a warning sign long before the yearly loss shows up. Ratios help you catch it early.<\/li>\r\n\r\n\r\n\r\n<li><strong>What should we decide?<\/strong> Whether to lend, invest, extend credit, set a budget, or change prices, ratios put some facts behind the decision.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Before you start, decide which question you\u2019re trying to answer. Worried about cash? Look at liquidity. Judging returns? Go for profitability. A clear goal saves you from working out ratios you\u2019ll never use.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Who Should Learn Ratio Analysis?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ratio analysis isn\u2019t only for accountants and analysts. Anyone who reads financial numbers or makes decisions from them will find it useful.<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>School and college students:<\/strong> If you\u2019re in Class 12 commerce, ratio analysis is already in your accountancy book. It also shows up in B.Com and MBA finance papers, so it\u2019s worth getting comfortable early.<\/li>\r\n\r\n\r\n\r\n<li><strong>CA, CMA, ACCA, and CFA aspirants:<\/strong> These exams test ratios again and again, in both theory and numerical questions. Keep the formulas next to you and solve plenty of questions.<\/li>\r\n\r\n\r\n\r\n<li><strong>Finance professionals:<\/strong> Bankers, credit analysts, auditors, and FP&amp;A people work with ratios every single day. A banker checks them before approving a loan, and an FP&amp;A analyst uses them to explain why the numbers moved.<\/li>\r\n\r\n\r\n\r\n<li><strong>Investors and traders:<\/strong> Before you buy a share, ratios like ROE, debt-to-equity, and P\/E tell you whether the business earns well and whether the price is fair. They help you look beyond the news and the tips.<\/li>\r\n\r\n\r\n\r\n<li><strong>Business owners and startup founders:<\/strong> If you run a business, ratios show what\u2019s working and what\u2019s slipping, usually long before the yearly report does. They\u2019re also what investors and banks will ask you about.<\/li>\r\n\r\n\r\n\r\n<li><strong>Managers from other functions:<\/strong> Marketing, operations, and sales heads all get performance reports built on these same numbers. Knowing how to read them helps you argue for your budget with facts.<\/li>\r\n\r\n\r\n\r\n<li><strong>People from a non-finance background:<\/strong> If you\u2019re an engineer, marketer, or career-switcher, simple division and a few definitions are all you need. After that, an annual report stops looking like a wall of numbers.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Whichever group you\u2019re in, the starting point is the same. Pick one company you know, open its annual report, and work out three or four ratios yourself.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>Classification of Ratio Analysis<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ask three textbooks how ratios are classified, and you may get three different answers, which confuses a lot of students. Two grouping methods are common.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-table\">\r\n<table class=\"has-fixed-layout\">\r\n<tbody>\r\n<tr>\r\n<td><strong>Basis<\/strong><\/td>\r\n<td><strong>Group<\/strong><\/td>\r\n<td><strong>Examples<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>By statement (traditional)<\/strong><\/td>\r\n<td>Balance sheet ratios<\/td>\r\n<td>Current ratio, quick ratio, debt-to-equity<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>By statement (traditional)<\/strong><\/td>\r\n<td>Profit and loss ratios<\/td>\r\n<td>Gross margin, net margin, operating ratio<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>By statement (traditional)<\/strong><\/td>\r\n<td>Composite ratios<\/td>\r\n<td>Return on equity, inventory turnover, debtors turnover<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>By purpose (functional)<\/strong><\/td>\r\n<td>Liquidity, solvency, activity, profitability<\/td>\r\n<td>The four groups most classrooms teach<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>By purpose (functional)<\/strong><\/td>\r\n<td>Market value<\/td>\r\n<td>EPS, price-to-earnings, dividend yield<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/figure>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">So are there four types or five? Most school and college books say four: liquidity, solvency, activity, and profitability. Finance professionals normally add market value ratios as a fifth because investors rely on them. This blog goes with five. If your syllabus says four, that&#8217;s fine; you lose nothing.<\/p>\r\n\r\n\r\n<div class=\"wp-block-image\">\r\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"557\" height=\"412\" class=\"wp-image-278509\" src=\"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/classification-of-ratio-analysis.webp\" alt=\"ratio analysis classification\r\n\" srcset=\"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/classification-of-ratio-analysis.webp 557w, https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/classification-of-ratio-analysis-300x222.webp 300w\" sizes=\"auto, (max-width: 557px) 100vw, 557px\" \/><\/figure>\r\n<\/div>\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<p class=\"has-background wp-block-paragraph\" style=\"background-color: #7bdbb426;\"><strong>Also Read:<\/strong> <a href=\"https:\/\/imarticus.org\/blog\/techniques-of-financial-statement-analysis\/\">Top Techniques of Financial Statement Analysis<\/a><\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Types of Ratio Analysis and Formulas<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The five types of ratio analysis are liquidity, profitability, solvency, activity, and market value ratios. Under each one below, you&#8217;ll find the ratio analysis formulas along with a small example, so you can see the working and not just the formula. I made up the numbers and kept them simple on purpose.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>1. Liquidity Ratios<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Liquidity Ratios tell you if the company can pay what it owes in the near term.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Current Ratio<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Current Ratio is the first ratio most people learn, and probably the one you\u2019ll use the most.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> <strong>Current Ratio = Current Assets \/ Current Liabilities<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Current Assets are \u20b91,20,000 and Current Liabilities are \u20b980,000. Dividing gives 1.5, so the company has \u20b91.50 on hand for every \u20b91 it must pay soon. People say 2 is ideal, but that&#8217;s an old rule of thumb and lots of healthy businesses sit below it.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Quick Ratio<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Think of Quick Ratio as the current ratio with the slow-moving items, like stock, taken out.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> (Current Assets \u2013 Inventory \u2013 Prepaid Expenses) \/ Current Liabilities.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Same company again. Inventory is \u20b930,000 and prepaid expenses are \u20b910,000, so quick assets are \u20b980,000, and the quick ratio is 1.0. Even if not one item of stock is sold, it could still pay its short-term dues.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>2. Profitability Ratios<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">A business can sell a lot and still earn very little. Profitability ratios show how much of those sales, and of the money put into the business, actually turns into profit.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">These show how well sales and capital are turning into profit.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Gross Profit Margin<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">This is the first profit check, done before overheads like rent and salaries are counted.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> (Gross Profit \u00f7 Revenue) \u00d7 100<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Revenue is \u20b910,00,000 and cost of goods sold is \u20b96,50,000, so gross profit is \u20b93,50,000, and the margin is 35%. The cost of production is subtracted, and there is still some money left over: \u20b935 from \u20b9100.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Net Profit Margin<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Gross margin ignores overheads, so net margin gives you the fuller picture.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Net Profit \/ Revenue x 100<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> If the net profit on this revenue is \u20b980,000, then the SP is \u20b980,000. The margin is 8%. If you have paid all the costs, interest, and tax, you are left with \u20b98 for every \u20b9100.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Return on Equity (ROE)<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">ROE is calculated as the percentage of Net Profit divided by the Average Shareholders&#8217; Equity.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> (Net Profit \/ Average Shareholders&#8217; Equity) x 100<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Net profit is \u20b980,000 and average equity is \u20b94,00,000, so ROE comes to 20%. The owners received \u20b920 for each \u20b9100 invested.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Return on Assets ( ROA)<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">ROA shows how much profit the business earns from everything it owns.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> If the profit is \u20b980,000 and the average total assets are \u20b98,00,000. ROA is 10%, so each \u20b9100 of assets earns \u20b910.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Return on capital employed (ROCE)<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">ROE looks only at the owners\u2019 money, while ROCE counts all the long-term money in the business, whether it came from owners or lenders.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> EBIT\/Capital Employed x 100<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> EBIT of a company is \u20b91,44,000, and capital employed (total assets \u2013 current liabilities) is \u20b97,20,000.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>3. Solvency Ratios<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Solvency ratios show whether the company can stay steady over the long run. The two below check how much it borrows and whether its profit can pay the interest.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Debt to Equity Ratio<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It compares what the company owes with what the owners have put in. That shows how much the business leans on borrowing.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Debt to Equity Ratio = Total Debt \u00f7 Shareholders&#8217; Equity<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Total debt of \u20b93,00,000 and shareholders&#8217; equity of \u20b96,00,000 give a ratio of 0.5. Thus, there is a debt-to-equity ratio of 50 paise to equity of \u20b91.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Interest Coverage Ratio<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It tells you how many times the company&#8217;s operating profit can cover its interest bill.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Interest Coverage Ratio = EBIT \/ Interest Expense<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> EBIT of \u20b91,50,000 and interest of \u20b930,000 give 5 times.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>4. Activity or Turnover Ratios<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Activity or Turnover Ratios show how well the company puts its assets to work. Below are 3 activity or turnover ratios: Inventory Turnover, Debtors Turnover, and Asset Turnover.\u00a0<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Inventory Turnover<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It shows how many times a company sells and replaces its stock in a year.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Cost of Goods Sold \u00f7 Average Inventory<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> If the cost of goods sold is \u20b96,00,000 and the average inventory is \u20b91,00,000, then the stock turns over 6 times during a year. The average number of days for selling an item is approximately 365 \/ 6 = 61 days.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Debtors Turnover<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It shows how quickly customers pay for what they bought on credit.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Net Credit Sales \/ Average Trade Receivables<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> The credit sales of a company are \u20b912,00,000, and the average of its receivables is \u20b92,00,000.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Asset Turnover<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It shows how many rupees of sales each \u20b91 of assets produces.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Asset Turnover = Revenue \/ Average Total Assets<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Revenue of \u20b910,00,000 on average assets of \u20b95,00,000 gives 2<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>5. Market Value Ratios<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Market Value Ratios are the connection between profit and share price; therefore, most investors rely on them.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">These connect profit to share price, which is why most investors rely on them. The three below show what the market pays for a company&#8217;s earnings and what shareholders get back.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Earnings Per Share (EPS)<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The per-share earnings of a company.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It tells you how much profit belongs to each equity share.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Net Profit + Preference Dividend divided by the Weighted Average Equity Shares.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Net profit is \u20b912,00,000, preference dividend is \u20b92,00,000, and there are 5,00,000 equity shares.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Price-to-Earnings (P\/E) Ratio<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It shows how many rupees investors pay for every \u20b91 of a company&#8217;s yearly earnings.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula: P\/E Ratio =<\/strong> Market Price per Share\/EPS<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> Share price \u20b940, EPS \u20b92, so the P\/E is 20. The company earns \u20b91, and it&#8217;s selling them for \u20b9 20 per year.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Dividend Yield<\/strong><\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">It shows the yearly cash a shareholder gets, as a percentage of the share price.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Formula:<\/strong> Dividend Yield = (Dividend per Share \/ Market Price per Share) x 100<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong> If a dividend of \u20b91.20 is paid on a share of \u20b940, it is called \u20b91.20 per cent. dividend on a \u20b940 share.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Since these ratios pull in the share price, they&#8217;re also your first step into <a href=\"https:\/\/imarticus.org\/blog\/an-introduction-to-financial-valuation-what-it-is-and-why-it-matters\/\">financial valuation<\/a>.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What is the formula for Ratio Analysis?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The formula for ratio analysis isn\u2019t just one. Each ratio has its own formula. What stays the same is the idea: divide one number by another related number.\u00a0<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>Ratio analysis uses many formulas, one for each ratio.<\/li>\r\n\r\n\r\n\r\n<li>Every formula divides one financial figure by a related one.<\/li>\r\n\r\n\r\n\r\n<li>Current ratio is a simple example: current assets \u00f7 current liabilities.<\/li>\r\n\r\n\r\n\r\n<li>Other common ones include net profit margin, debt-to-equity, and inventory turnover.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">You\u2019ll find all the common ones in the formula sections above.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Ratio Analysis Example With Calculation<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Time to use the ratio analysis formulas together on one company. Asha Textiles Ltd is imaginary, and every figure is in \u20b9 lakh. To keep the maths easy, I&#8217;ve used closing balances.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-table\">\r\n<table class=\"has-fixed-layout\">\r\n<tbody>\r\n<tr>\r\n<td><strong>Item<\/strong><\/td>\r\n<td><strong>Amount<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Revenue<\/strong><\/td>\r\n<td>1,200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Cost of goods sold<\/strong><\/td>\r\n<td>780<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Gross profit<\/strong><\/td>\r\n<td>420<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>EBIT (operating profit)<\/strong><\/td>\r\n<td>180<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Interest expense<\/strong><\/td>\r\n<td>30<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Net profit<\/strong><\/td>\r\n<td>105<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Current assets (inventory 150, receivables 120, prepaid 50, cash 130)<\/strong><\/td>\r\n<td>450<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Current liabilities<\/strong><\/td>\r\n<td>300<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Total assets<\/strong><\/td>\r\n<td>1,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Long-term debt<\/strong><\/td>\r\n<td>200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Shareholders&#8217; equity<\/strong><\/td>\r\n<td>500<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/figure>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Now the ratios, with a line on what each one tells us.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-table\">\r\n<table class=\"has-fixed-layout\">\r\n<tbody>\r\n<tr>\r\n<td><strong>Ratio<\/strong><\/td>\r\n<td><strong>Working<\/strong><\/td>\r\n<td><strong>Result<\/strong><\/td>\r\n<td><strong>What it says<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Current ratio<\/strong><\/td>\r\n<td>450 \u00f7 300<\/td>\r\n<td>1.5<\/td>\r\n<td>Short-term dues are covered 1.5 times over<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Quick ratio<\/strong><\/td>\r\n<td>(450 \u2212 150 \u2212 50) \u00f7 300<\/td>\r\n<td>0.83<\/td>\r\n<td>A little tight if stock doesn&#8217;t sell<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Gross margin<\/strong><\/td>\r\n<td>420 \u00f7 1,200 \u00d7 100<\/td>\r\n<td>35%<\/td>\r\n<td>Good markup on production cost<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Net margin<\/strong><\/td>\r\n<td>105 \u00f7 1,200 \u00d7 100<\/td>\r\n<td>8.75%<\/td>\r\n<td>\u20b98.75 profit from every \u20b9100 of sales<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Return on equity<\/strong><\/td>\r\n<td>105 \u00f7 500 \u00d7 100<\/td>\r\n<td>21%<\/td>\r\n<td>Strong return for owners<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Return on assets<\/strong><\/td>\r\n<td>105 \u00f7 1,000 \u00d7 100<\/td>\r\n<td>10.5%<\/td>\r\n<td>Assets are earning a decent profit<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Debt to equity<\/strong><\/td>\r\n<td>200 \u00f7 500<\/td>\r\n<td>0.4<\/td>\r\n<td>Borrowing is moderate<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Interest coverage<\/strong><\/td>\r\n<td>180 \u00f7 30<\/td>\r\n<td>6 times<\/td>\r\n<td>Interest is easily covered<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Inventory turnover<\/strong><\/td>\r\n<td>780 \u00f7 150<\/td>\r\n<td>5.2 times<\/td>\r\n<td>Stock sells in about 70 days<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>Debtors turnover<\/strong><\/td>\r\n<td>1,200 \u00f7 120<\/td>\r\n<td>10 times<\/td>\r\n<td>Customers pay in about 37 days, if every sale is on credit<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/figure>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Overall, Asha Textiles earns decent returns and manages its debt well. The thing to watch is the quick ratio. It suggests that lots of cash is tied up in inventory, and a quick-thinking and analytical person would want to know the reason for such high levels of inventory before uttering a word.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>Practice Questions on Ratio Analysis<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">A lot of students search for ratio analysis questions and answers, so try these two first and check the solutions after.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Sample Question 1:<\/strong> Current assets are \u20b96 lakh, current liabilities are \u20b93 lakh, and inventory is \u20b91 lakh. Find the current ratio and the quick ratio.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Answer:<\/strong> Current ratio is 6\/3 or 2:1. Quick ratio is (6 \u2212 1) \u00f7 3, which is 1.67:1.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Sample Question 2:<\/strong> Revenue is \u20b960 lakh, net profit is \u20b96 lakh, equity is \u20b930 lakh, and debt is \u20b915 lakh. Find the net margin, return on equity, and debt-to-equity.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\"><strong>Answer:<\/strong> Net margin 10%, return on equity 20%, and debt-to-equity 0.5.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">In the exam, put down the formula first, then the working. Even if your final number is slightly incorrect, the examiner will give marks for both.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Interpretation of Financial Ratios\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Working out the number is the easy bit. Reading it is what analysts get paid for. No ratio has one perfect value, and a single result can&#8217;t prove that a business is healthy or in trouble.<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>A current ratio of 1.5 is good if it was 1.1 last year, and it&#8217;s bad if it was 2.4 last year.<\/li>\r\n\r\n\r\n\r\n<li>Use industry benchmarks. A senior fashion designer is studying the financial statements of a supermarket and a software company.<\/li>\r\n\r\n\r\n\r\n<li>Read ratios that go together. It&#8217;s not always a sign of skill to have a high return on equity combined with lots of debt. The advantage of using DuPont analysis is that it decomposes ROE into margin, asset turnover, and leverage. For Asha Textiles, that&#8217;s 8.75% \u00d7 1.2 \u00d7 2.0, and you land on the same 21%.<\/li>\r\n\r\n\r\n\r\n<li>Consider the business model. Seasonal, asset-heavy, and service businesses are all different.<\/li>\r\n\r\n\r\n\r\n<li>Verify the condition of numbers.<\/li>\r\n<\/ul>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>AI in Ratio Analysis<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Software now does the boring part of ratio analysis for you. It reads the statements, works out dozens of ratios in seconds, and flags a number when it jumps. That saves hours, especially when you track many companies at once. Here are the core applications of AI and automation in ratio analysis:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>Pulling data automatically:<\/strong> Tools can read figures straight from balance sheets, profit and loss statements, and annual reports, so nobody has to retype them into Excel. That also removes the typing mistakes that quietly ruin ratios.<\/li>\r\n\r\n\r\n\r\n<li><strong>Calculating ratios instantly:<\/strong> Once the data is in, liquidity, profitability, solvency, activity, and market value ratios are worked out in one go, and they stay in the same format from year to year.<\/li>\r\n\r\n\r\n\r\n<li><strong>Spotting unusual changes:<\/strong> A system can watch ratios over time and alert you when one moves sharply, like a quick ratio that drops in a single quarter. You see the problem early instead of at the yearly review.<\/li>\r\n\r\n\r\n\r\n<li><strong>Comparing with peers and benchmarks:<\/strong> Dashboards can set a company\u2019s ratios against similar companies or the industry average, which is the comparison step most people skip when working by hand.<\/li>\r\n\r\n\r\n\r\n<li><strong>Forecasting and \u201cwhat if\u201d checks:<\/strong> You can test how a ratio would change if sales fall 10% or borrowing rises, and see the effect before you make the decision.<\/li>\r\n\r\n\r\n\r\n<li><strong>Writing the first draft of a report:<\/strong> AI tools can turn a table of ratios into a short written summary, which analysts then check and improve.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">You still have to think, though. A tool might say the quick ratio fell. Is that a slow season or a real problem? Is the company stocking up before a festive rush, or is stock simply not selling? The software can\u2019t tell you. It also can\u2019t tell when the underlying statements are wrong, or when two companies account for stock in different ways. Learn the basics first, and you\u2019ll know when the tool is wrong.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<p class=\"has-background wp-block-paragraph\" style=\"background-color: #7bdbb426;\"><strong>Also Read:<\/strong> <a href=\"https:\/\/imarticus.org\/blog\/dupont-analysis\/\"><strong>DuPont Analysis<\/strong><\/a><\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Importance of Ratio Analysis<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Numbers in a financial statement mean little until someone compares them, and that is where ratios earn their place. Many people read a company\u2019s accounts, and each is looking for a different answer. Ratio analysis gives all of them one simple way to get it.<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>For investors:<\/strong> You\u2019re thinking of buying a share. Is it priced fairly, and is the business earning enough on the money put into it? Profitability and market value ratios give you a rough answer. Most investors also set two or three similar companies side by side before deciding, because a ratio reads very differently next to its peers.<\/li>\r\n\r\n\r\n\r\n<li><strong>For lenders:<\/strong> A bank wants its money back, with interest. So it checks how much cash the company has, how much it already owes, and whether profit can cover the interest. If those ratios look weak, the loan usually doesn\u2019t go through.<\/li>\r\n\r\n\r\n\r\n<li><strong>For suppliers:<\/strong> Before offering credit, a supplier looks at liquidity ratios to judge whether the buyer will pay on time.<\/li>\r\n\r\n\r\n\r\n<li><strong>For management:<\/strong> Say a shop owner sees gross margin slip from 35% to 30%. Something changed, maybe raw material got costlier. The ratio shows it long before the yearly report does, so the owner can act in time.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">In short, the same set of accounts gives each of these readers a clear answer to their own question.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<p class=\"has-background wp-block-paragraph\" style=\"background-color: #7bdbb426;\"><strong><em>Did you know?<\/em><\/strong><strong><em><br \/><\/em><\/strong><em>The ideal current ratio varies by industry. Large retailers can safely run below 1.0, because their stock sells fast and cash comes in quickly. (<\/em><a href=\"https:\/\/busy.in\/accounting\/what-is-current-ratio-formula-ideal-range-and-what-it-tells-you\/\"><em>Source<\/em><\/a><em>)<\/em><\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>Advantages and Limitations of Ratio Analysis<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Let\u2019s first explore the advantages of ratio analysis:<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>Advantages of Ratio Analysis<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ratio analysis is popular for a good reason. Here are the main advantages of ratio analysis:<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>Big financial statements turn into a handful of numbers that are easy to read.<\/li>\r\n\r\n\r\n\r\n<li>A small company and a big one can be compared fairly.<\/li>\r\n\r\n\r\n\r\n<li>A ratio that keeps falling is often the first sign of trouble.<\/li>\r\n\r\n\r\n\r\n<li>Past ratios help when you plan next year\u2019s budget.<\/li>\r\n\r\n\r\n\r\n<li>Lending, investing, and pricing decisions get some proof behind them.<\/li>\r\n\r\n\r\n\r\n<li>You don\u2019t need special software. Excel is enough.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>Limitations of Ratio Analysis<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ratios are useful, but they have limits. Keep these in mind before relying on them:\u00a0<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li>If the financial statements have mistakes, the ratios will have them too.<\/li>\r\n\r\n\r\n\r\n<li>They show the past. They can\u2019t tell you what happens next year.<\/li>\r\n\r\n\r\n\r\n<li>Companies can value stock or depreciation in different ways, and that changes profit.<\/li>\r\n\r\n\r\n\r\n<li>Assets bought years ago sit in the books at old prices, so an older company can look better than it is.<\/li>\r\n\r\n\r\n\r\n<li>A busy month and a slow month give very different numbers.<\/li>\r\n\r\n\r\n\r\n<li>A great team or a strong brand won\u2019t show up in any ratio.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">So treat ratios as a starting point. The real answers come when you dig deeper.<\/p>\r\n\r\n\r\n<div class=\"wp-block-image\">\r\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"768\" height=\"829\" class=\"wp-image-278510\" src=\"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/advantages-and-limitations-of-ratio-analysis.webp\" alt=\"limitations and advantages of ratio analysis\r\n\" srcset=\"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/advantages-and-limitations-of-ratio-analysis.webp 768w, https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/advantages-and-limitations-of-ratio-analysis-278x300.webp 278w\" sizes=\"auto, (max-width: 768px) 100vw, 768px\" \/><\/figure>\r\n<\/div>\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<p class=\"has-background wp-block-paragraph\" style=\"background-color: #7bdbb426;\"><strong>Also Read:<\/strong> <a href=\"https:\/\/imarticus.org\/blog\/what-is-importance-of-financial-analysis-career-scope\/\">Importance of Financial Analysis<\/a><\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>How to Build Financial Analysis Skills<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Reading about financial ratios is the easy bit. Anyone can look up a formula, punch numbers into a calculator, and recite a definition. But the moment you sit down with a real company\u2019s 150-page annual report, staring at raw data across footnotes and segment disclosures, trying to make actionable sense of it? That is where most people get completely stuck.<\/p>\r\n\r\n\r\n\r\n<ul class=\"wp-block-list\">\r\n<li><strong>Learn without leaving your job:<\/strong> Live classes run on weekends over 4 months, so you can build the skill alongside your work.<\/li>\r\n\r\n\r\n\r\n<li><strong>Learn from people who do this for a living:<\/strong> PwC India, our knowledge partner, runs workshops where you see how analysis is done on the job, not just how a textbook describes it.<\/li>\r\n\r\n\r\n\r\n<li><strong>Practise on real company data:<\/strong> In the Decoding Performance: Ratio and DuPont Deep Dive project, you take a real company\u2019s numbers and work out what is driving its performance. That is the same exercise analysts do at work.<\/li>\r\n\r\n\r\n\r\n<li><strong>Go beyond ratios:<\/strong> You also work through Excel, forecasting, financial modelling, valuation, M&amp;A, and equity research, and you use Power BI, Excel with AI, Copilot, and Zapier along the way.<\/li>\r\n\r\n\r\n\r\n<li><strong>Finish with a credential that shows:<\/strong> You get a joint certificate from Imarticus Learning and PwC Academy, which puts the PwC name next to yours on your CV and LinkedIn.<\/li>\r\n\r\n\r\n\r\n<li><strong>Join a ready community:<\/strong> More than 6,000 people have completed the programme across 50+ batches, so you\u2019d have a large alumni network to learn from and grow with.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">If you want ratio analysis to become a skill you can actually use at work, join the <a href=\"https:\/\/imarticus.org\/financial-analysis-prodegree\/\"><strong>Financial Analysis ProDegree<\/strong><\/a> and start on real cases.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h2 class=\"wp-block-heading\"><strong>FAQs About Ratio Analysis<\/strong><\/h2>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">If you have a doubt before an exam, an interview, or an investment, look at some of these frequently asked questions about ratio analysis that will help clear it up fast.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What are the five types of Ratio Analysis?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The five types of Ratio Analysis are Liquidity, profitability, solvency, activity, and market value. Quick way to remember them: liquidity is about bills due soon, profitability is about earnings, solvency is about long-term debt, activity is about how well assets are used, and market value ties profit to the share price. Some textbooks stop at four and leave out market value.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>How to calculate a Ratio Analysis?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">To calculate ratio analysis, divide one financial figure by another related figure taken from a company\u2019s financial statements, such as the balance sheet, income statement, or cash flow statement. The core formula is Ratio = Financial Item A \u00f7 Financial Item B, like current assets \u00f7 current liabilities. Start with liquidity and profitability ratios, then move to solvency and efficiency. Then compare your result with last year\u2019s number and the industry average, because that\u2019s where you learn something.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What is a ratio and its types?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">A ratio just compares two numbers. It can be a fraction, a percentage, or written as x:y. In finance, you\u2019ll mostly meet five kinds: liquidity, profitability, solvency, activity, and market value.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What is Ratio Analysis used for?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Ratio Analysis is mainly used to see how healthy a business is. Investors use it to choose shares. Banks use it before giving a loan. Managers use it to spot problems early. And if you\u2019re a student, you\u2019ll see it in Class 12 and in professional finance exams.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What are the top 10 Ratios to analyse a company?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The top 10 Ratios to analyse a company, as per me, are: current ratio, quick ratio, gross profit margin, net profit margin, return on equity, return on capital employed, debt-to-equity, interest coverage, inventory turnover, and price-to-earnings. Between them, you get a view of cash, profit, debt, efficiency, and valuation.<\/p>\r\n\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>What is the significance of Ratio Analysis?<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">The significance of Ratio Analysis is that it takes pages of financial statements and boils them down to a few clear numbers. With those, you can compare companies of different sizes, see progress over time, and make better lending, investing, and management decisions.<\/p>\r\n\r\n\r\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\r\n\r\n\r\n<h3 class=\"wp-block-heading\"><strong>From Raw Numbers to Clear Decisions<\/strong><\/h3>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">Remember the company with \u20b910 crore profit? Whether that is good depends on what it took to earn it. On \u20b950 crore of assets, it is a 20% return, but on \u20b9500 crore it would be just 2%. The profit figure alone could never have told you that, and one ratio does. That is the whole point of ratio analysis: you check the facts instead of going by gut feeling or by how big a number sounds. You\u2019ve now seen the meaning, the five types, the main formulas, a full worked case in Asha Textiles, and the limits to keep in mind. None of it needs advanced maths, only regular practice on real statements.<\/p>\r\n\r\n\r\n\r\n<p class=\"wp-block-paragraph\">So learn the five types, practise the formulas on real statements, and always compare before you decide. If you\u2019d like guided practice with live classes and real company projects, take a look at the <a href=\"https:\/\/imarticus.org\/financial-analysis-prodegree\/\"><strong>Financial Analysis ProDegree<\/strong><\/a>. Your next annual report will start making sense a lot sooner than you expect.<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>An expert guide to ratio analysis: meaning, types, formulas, worked examples, key benefits and limits.<\/p>\n","protected":false},"author":1,"featured_media":278511,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_lmt_disableupdate":"no","_lmt_disable":"no","_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-278507","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"acf":{"ls_key":"FAP","youtube-url-id":"","publised_date":"","recommended_posts":""},"aioseo_notices":[],"aioseo_head":"\n\t\t<!-- All in One SEO 5.0.1.1 - aioseo.com -->\n\t<meta name=\"description\" content=\"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.\" \/>\n\t<meta name=\"robots\" content=\"max-image-preview:large\" \/>\n\t<meta name=\"author\" content=\"Imarticus Learning\"\/>\n\t<link rel=\"canonical\" href=\"https:\/\/imarticus.org\/blog\/ratio-analysis\/\" \/>\n\t<meta name=\"generator\" content=\"All in One SEO (AIOSEO) 5.0.1.1\" \/>\n\t\t<meta property=\"og:locale\" content=\"en_GB\" \/>\n\t\t<meta property=\"og:site_name\" content=\"Imarticus Blog -\" \/>\n\t\t<meta property=\"og:type\" content=\"article\" \/>\n\t\t<meta property=\"og:title\" content=\"Ratio Analysis: Meaning, Types, Formulas and Examples\" \/>\n\t\t<meta property=\"og:description\" content=\"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.\" \/>\n\t\t<meta property=\"og:url\" content=\"https:\/\/imarticus.org\/blog\/ratio-analysis\/\" \/>\n\t\t<meta property=\"article:published_time\" content=\"2026-10-14T12:04:32+00:00\" \/>\n\t\t<meta property=\"article:modified_time\" content=\"2026-10-19T06:05:04+00:00\" \/>\n\t\t<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ImarticusLearning\/\" \/>\n\t\t<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n\t\t<meta name=\"twitter:site\" content=\"@imarticus\" \/>\n\t\t<meta name=\"twitter:title\" content=\"Ratio Analysis: Meaning, Types, Formulas and Examples\" \/>\n\t\t<meta name=\"twitter:description\" content=\"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.\" \/>\n\t\t<meta name=\"twitter:creator\" content=\"@imarticus\" \/>\n\t\t<script type=\"application\/ld+json\" class=\"aioseo-schema\">\n\t\t\t{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"BlogPosting\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#blogposting\",\"name\":\"Ratio Analysis: Meaning, Types, Formulas and Examples\",\"headline\":\"Ratio Analysis: Meaning, Types, Formulas and Examples\",\"author\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/author\\\/imarticus\\\/#author\"},\"publisher\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/#organization\"},\"image\":{\"@type\":\"ImageObject\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/wp-content\\\/uploads\\\/2026\\\/10\\\/ratio-analysis.webp\",\"width\":1200,\"height\":630},\"datePublished\":\"2026-10-14T17:34:32+05:30\",\"dateModified\":\"2026-10-19T11:35:04+05:30\",\"inLanguage\":\"en-GB\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#webpage\"},\"isPartOf\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#webpage\"},\"articleSection\":\"Finance\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#breadcrumblist\",\"itemListElement\":[{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog#listItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/imarticus.org\\\/blog\",\"nextItem\":{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/category\\\/finance\\\/#listItem\",\"name\":\"Finance\"}},{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/category\\\/finance\\\/#listItem\",\"position\":2,\"name\":\"Finance\",\"item\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/category\\\/finance\\\/\",\"nextItem\":{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#listItem\",\"name\":\"Ratio Analysis: Meaning, Types, Formulas and Examples\"},\"previousItem\":{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog#listItem\",\"name\":\"Home\"}},{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#listItem\",\"position\":3,\"name\":\"Ratio Analysis: Meaning, Types, Formulas and Examples\",\"previousItem\":{\"@type\":\"ListItem\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/category\\\/finance\\\/#listItem\",\"name\":\"Finance\"}}]},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/#organization\",\"name\":\"Imarticus Learning\",\"description\":\"Imarticus Learning is the leading institute for career-focused finance and tech programs. Looking for an investment banking course in Mumbai? Our Certified Investment Banking Operations Program (CIBOP) offers industry-leading placements with 100% Job Assurance, making it one of the most sought-after investment banking courses in Mumbai. Aspiring data professionals can enrol in our data science course in Mumbai, the Postgraduate Program in Data Science &amp; Analytics with GenAI (PGA), designed to deliver the highest salaries and a vast hiring network. As a top destination for data science training in Mumbai, we offer live training, hands-on projects &amp; guaranteed outcomes. Imarticus Learning, your launchpad for high-impact careers.\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/\",\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/ImarticusLearning\\\/\",\"https:\\\/\\\/x.com\\\/imarticus\",\"https:\\\/\\\/www.instagram.com\\\/imarticus\\\/\",\"https:\\\/\\\/www.youtube.com\\\/@ImarticusLearningInstitute\",\"https:\\\/\\\/in.linkedin.com\\\/company\\\/imarticuslearning\"]},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/author\\\/imarticus\\\/#author\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/author\\\/imarticus\\\/\",\"name\":\"Imarticus Learning\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#authorImage\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/26c0ffd94601c4078ba4c61e5b9dd95dbb2872f64fd398e2c5d020e8ff0eb581?s=96&d=mm&r=g\",\"width\":96,\"height\":96,\"caption\":\"Imarticus Learning\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#webpage\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/\",\"name\":\"Ratio Analysis: Meaning, Types, Formulas and Examples\",\"description\":\"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.\",\"inLanguage\":\"en-GB\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/#website\"},\"breadcrumb\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#breadcrumblist\"},\"author\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/author\\\/imarticus\\\/#author\"},\"creator\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/author\\\/imarticus\\\/#author\"},\"image\":{\"@type\":\"ImageObject\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/wp-content\\\/uploads\\\/2026\\\/10\\\/ratio-analysis.webp\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#mainImage\",\"width\":1200,\"height\":630},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/ratio-analysis\\\/#mainImage\"},\"datePublished\":\"2026-10-14T17:34:32+05:30\",\"dateModified\":\"2026-10-19T11:35:04+05:30\"},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/#website\",\"url\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/\",\"name\":\"Imarticus Learning\",\"inLanguage\":\"en-GB\",\"publisher\":{\"@id\":\"https:\\\/\\\/imarticus.org\\\/blog\\\/#organization\"}}]}\n\t\t<\/script>\n\t\t<script type=\"text\/javascript\">\n\t\t\t(function(c,l,a,r,i,t,y){\n\t\t\tc[a]=c[a]||function(){(c[a].q=c[a].q||[]).push(arguments)};t=l.createElement(r);t.async=1;\n\t\t\tt.src=\"https:\/\/www.clarity.ms\/tag\/\"+i+\"?ref=aioseo\";y=l.getElementsByTagName(r)[0];y.parentNode.insertBefore(t,y);\n\t\t})(window, document, \"clarity\", \"script\", \"p9rn6xgm87\");\n\t\t<\/script>\n\t\t<!-- All in One SEO -->\n\n","aioseo_head_json":{"title":"Ratio Analysis: Meaning, Types, Formulas and Examples","description":"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.","canonical_url":"https:\/\/imarticus.org\/blog\/ratio-analysis\/","robots":"max-image-preview:large","keywords":"","webmasterTools":{"miscellaneous":""},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"BlogPosting","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#blogposting","name":"Ratio Analysis: Meaning, Types, Formulas and Examples","headline":"Ratio Analysis: Meaning, Types, Formulas and Examples","author":{"@id":"https:\/\/imarticus.org\/blog\/author\/imarticus\/#author"},"publisher":{"@id":"https:\/\/imarticus.org\/blog\/#organization"},"image":{"@type":"ImageObject","url":"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/ratio-analysis.webp","width":1200,"height":630},"datePublished":"2026-10-14T17:34:32+05:30","dateModified":"2026-10-19T11:35:04+05:30","inLanguage":"en-GB","mainEntityOfPage":{"@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#webpage"},"isPartOf":{"@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#webpage"},"articleSection":"Finance"},{"@type":"BreadcrumbList","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#breadcrumblist","itemListElement":[{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog#listItem","position":1,"name":"Home","item":"https:\/\/imarticus.org\/blog","nextItem":{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog\/category\/finance\/#listItem","name":"Finance"}},{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog\/category\/finance\/#listItem","position":2,"name":"Finance","item":"https:\/\/imarticus.org\/blog\/category\/finance\/","nextItem":{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#listItem","name":"Ratio Analysis: Meaning, Types, Formulas and Examples"},"previousItem":{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog#listItem","name":"Home"}},{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#listItem","position":3,"name":"Ratio Analysis: Meaning, Types, Formulas and Examples","previousItem":{"@type":"ListItem","@id":"https:\/\/imarticus.org\/blog\/category\/finance\/#listItem","name":"Finance"}}]},{"@type":"Organization","@id":"https:\/\/imarticus.org\/blog\/#organization","name":"Imarticus Learning","description":"Imarticus Learning is the leading institute for career-focused finance and tech programs. Looking for an investment banking course in Mumbai? Our Certified Investment Banking Operations Program (CIBOP) offers industry-leading placements with 100% Job Assurance, making it one of the most sought-after investment banking courses in Mumbai. Aspiring data professionals can enrol in our data science course in Mumbai, the Postgraduate Program in Data Science &amp; Analytics with GenAI (PGA), designed to deliver the highest salaries and a vast hiring network. As a top destination for data science training in Mumbai, we offer live training, hands-on projects &amp; guaranteed outcomes. Imarticus Learning, your launchpad for high-impact careers.","url":"https:\/\/imarticus.org\/blog\/","sameAs":["https:\/\/www.facebook.com\/ImarticusLearning\/","https:\/\/x.com\/imarticus","https:\/\/www.instagram.com\/imarticus\/","https:\/\/www.youtube.com\/@ImarticusLearningInstitute","https:\/\/in.linkedin.com\/company\/imarticuslearning"]},{"@type":"Person","@id":"https:\/\/imarticus.org\/blog\/author\/imarticus\/#author","url":"https:\/\/imarticus.org\/blog\/author\/imarticus\/","name":"Imarticus Learning","image":{"@type":"ImageObject","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#authorImage","url":"https:\/\/secure.gravatar.com\/avatar\/26c0ffd94601c4078ba4c61e5b9dd95dbb2872f64fd398e2c5d020e8ff0eb581?s=96&d=mm&r=g","width":96,"height":96,"caption":"Imarticus Learning"}},{"@type":"WebPage","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#webpage","url":"https:\/\/imarticus.org\/blog\/ratio-analysis\/","name":"Ratio Analysis: Meaning, Types, Formulas and Examples","description":"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.","inLanguage":"en-GB","isPartOf":{"@id":"https:\/\/imarticus.org\/blog\/#website"},"breadcrumb":{"@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#breadcrumblist"},"author":{"@id":"https:\/\/imarticus.org\/blog\/author\/imarticus\/#author"},"creator":{"@id":"https:\/\/imarticus.org\/blog\/author\/imarticus\/#author"},"image":{"@type":"ImageObject","url":"https:\/\/imarticus.org\/blog\/wp-content\/uploads\/2026\/10\/ratio-analysis.webp","@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#mainImage","width":1200,"height":630},"primaryImageOfPage":{"@id":"https:\/\/imarticus.org\/blog\/ratio-analysis\/#mainImage"},"datePublished":"2026-10-14T17:34:32+05:30","dateModified":"2026-10-19T11:35:04+05:30"},{"@type":"WebSite","@id":"https:\/\/imarticus.org\/blog\/#website","url":"https:\/\/imarticus.org\/blog\/","name":"Imarticus Learning","inLanguage":"en-GB","publisher":{"@id":"https:\/\/imarticus.org\/blog\/#organization"}}]},"og:locale":"en_GB","og:site_name":"Imarticus Blog -","og:type":"article","og:title":"Ratio Analysis: Meaning, Types, Formulas and Examples","og:description":"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.","og:url":"https:\/\/imarticus.org\/blog\/ratio-analysis\/","article:published_time":"2026-10-14T12:04:32+00:00","article:modified_time":"2026-10-19T06:05:04+00:00","article:publisher":"https:\/\/www.facebook.com\/ImarticusLearning\/","twitter:card":"summary_large_image","twitter:site":"@imarticus","twitter:title":"Ratio Analysis: Meaning, Types, Formulas and Examples","twitter:description":"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.","twitter:creator":"@imarticus"},"aioseo_meta_data":{"post_id":"278507","title":"Ratio Analysis: Meaning, Types, Formulas and Examples","description":"Learn ratio analysis with simple formulas, types, a worked example, advantages and limitations. A clear guide to reading financial statements like an analyst.","keywords":null,"keyphrases":{"focus":{"keyphrase":"ratio analysis","score":0,"analysis":[]},"additional":[]},"primary_term":null,"canonical_url":null,"og_title":null,"og_description":null,"og_object_type":"default","og_image_type":"default","og_image_url":null,"og_image_width":null,"og_image_height":null,"og_image_custom_url":null,"og_image_custom_fields":null,"og_video":"","og_custom_url":null,"og_article_section":null,"og_article_tags":null,"twitter_use_og":false,"twitter_card":"default","twitter_image_type":"default","twitter_image_url":null,"twitter_image_custom_url":null,"twitter_image_custom_fields":null,"twitter_title":null,"twitter_description":null,"schema":{"blockGraphs":[],"customGraphs":[],"default":{"data":{"Article":[],"Course":[],"Dataset":[],"FAQPage":[],"Movie":[],"Person":[],"Product":[],"ProductReview":[],"Car":[],"Recipe":[],"Service":[],"SoftwareApplication":[],"WebPage":[]},"graphName":"BlogPosting","isEnabled":true},"graphs":[]},"schema_type":"default","schema_type_options":null,"pillar_content":false,"robots_default":true,"robots_noindex":false,"robots_noarchive":false,"robots_nosnippet":false,"robots_nofollow":false,"robots_noimageindex":false,"robots_noodp":false,"robots_notranslate":false,"robots_max_snippet":"-1","robots_max_videopreview":"-1","robots_max_imagepreview":"large","priority":null,"frequency":"default","local_seo":null,"breadcrumb_settings":null,"limit_modified_date":0,"ai":{"faqs":[],"keyPoints":[],"schemas":[],"titles":[],"descriptions":[],"socialPosts":{"email":{"subject":"","preview":"","content":""},"linkedin":[],"twitter":[],"facebook":[],"instagram":[]}},"created":"2026-10-14 12:02:36","updated":"2026-10-19 06:05:06","seo_analyzer_scan_date":null,"focus_keyword":"ratio analysis","additional_keywords":null,"truseo_locale":null},"aioseo_breadcrumb":"<div class=\"aioseo-breadcrumbs\"><span class=\"aioseo-breadcrumb\">\n\t\t\t<a href=\"https:\/\/imarticus.org\/blog\" title=\"Home\">Home<\/a>\n\t\t<\/span><span class=\"aioseo-breadcrumb-separator\">\u00bb<\/span><span class=\"aioseo-breadcrumb\">\n\t\t\t<a href=\"https:\/\/imarticus.org\/blog\/category\/finance\/\" title=\"Finance\">Finance<\/a>\n\t\t<\/span><span class=\"aioseo-breadcrumb-separator\">\u00bb<\/span><span class=\"aioseo-breadcrumb\">\n\t\t\tRatio Analysis: Meaning, Types, Formulas and Examples\n\t\t<\/span><\/div>","aioseo_breadcrumb_json":[{"label":"Home","link":"https:\/\/imarticus.org\/blog"},{"label":"Finance","link":"https:\/\/imarticus.org\/blog\/category\/finance\/"},{"label":"Ratio Analysis: Meaning, Types, Formulas and Examples","link":"https:\/\/imarticus.org\/blog\/ratio-analysis\/"}],"modified_by":"Imarticus Learning","_links":{"self":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/278507","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/comments?post=278507"}],"version-history":[{"count":3,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/278507\/revisions"}],"predecessor-version":[{"id":278554,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/278507\/revisions\/278554"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media\/278511"}],"wp:attachment":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media?parent=278507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/categories?post=278507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/tags?post=278507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}