Accountancy/Ratios

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financial ratios help us for better undestanding of business s perivious and future financial position and it s operating result, specialy when we have tow year or more financial stetement of a business. also , these ratios help us find critical items in auditing becuse there are reletion s between the financial statement items .for ex supose that in a company in secund year sale , accounts payable and inventory were decreased in the other hand accounts recivable and expenses were incrsead a simple analise with financial ratios can tell us what hapend and will hapen for company. some ansewr can be : 1- the operational activities have decreased . 2- the company has lost the market. 3- the sale prices has decreased 4- inventory has dameged and ... if we have the numbers we can better find out the cause financial ratios dividend in to : 1- liquidity ratios 2- leverag ratios 3- activity ratios 4- profitability ratios