Managers use ratio analysis for different purposes. Identify one of the ratios covered in this module. Describe how the ratio is calculated. Classify the ratios purpose. Explain how to interpret the results of the ratio. Demonstrate critical thinking with an example applied to your employer or similar company. Financial Statements for all publicly traded US companies are found on the SEC.gov website here under Company Filings.

Example:

The current ratio measures a companys ability to pay short-term obligations with current assets as they become due. The current ratio is a liquidity ratio. This ratio informs investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other current liabilities. It is calculated by dividing current assets by current liabilities. The desired result is 1 or greater.