Before engaging in discussions about varying types of financial ratios, it is most important to have a working definition of a financial ratio and likewise, of a financial statement. According to the Financial Dictionary on Free Dictionary dot com (2007), a financial ratio “is the result of dividing one financial statement item by another.” It also states that financial ratios assist analysts in data interpretation by examining specific correlations (2007). InvestorWords best defines a financial statement:

A written report which quantitatively describes the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Financial statements are usually compiled on a quarterly and annual basis (1997-2007).

A most important factor to recognize in the above definition is that the financial statement quantifies financial data, not qualifies it. Qualification of financial data is accomplished via the use......

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Title: Financial Ratios
Approximate Word Count: 1071
Approximate Pages: 5 (250 words per double-spaced page)

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