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Accounting ratios assist in the interpretation of financial performance of an entity. Information such as business solvency, its profitability, the return on its assets, its ability to meet short-term and long-term liabilities et cetra, is vital in gauging a business’ health and its commercial vialbility. Such information is vital for all the stakeholders, that is shareholders, potential investors, the management, creditors, guarantors and statutory/regulatory bodies.
Financial statement analysis/accounting ratios can be divided into following categories:
