<h3>the quantitative relation between two amounts showing the number of times one value contains or is contained within the other.</h3>
Ratio analysis consists of the calculation of ratios from financial statements and is a foundation of financial analysis.
A financial ratio, or accounting ratio, shows the relative magnitude of selected numerical values taken from those financial statements.
The numbers contained in financial statements need to be put into context so that investors can better understand different aspects of the company’s operations. Ratio analysis is one method an investor can use to gain that understanding.
<h3>Key Terms</h3>
liquidity: Availability of cash over short term: ability to service short-term debt.
ratio: A number representing a comparison between two things.
ratio analysis: the use of quantitative techniques on values taken from an enterprise’s financial statements
C=1500+4x where x is cds, C is cost R=10x where R is revenue then, P=R-C P=10x-1500-4x P=6x-1500 set P=0 1500=6x x=250 check, C=1500+4*250, R=10*250 C=250, R=250 They need to sell 250 cds before they make profit
