You can build a house without the right measuring tools to ensure that the structure is sound and won collapse: tape measures, protractors and levels are used to tell construction workers and architects how much material is needed and where everything goes. In the business world, the measuring tools are called financial ratios, and they help you evaluate a financial statement. By learning how to calculate and analyze specific ratios, you can evaluate trends, determine how healthy a business is, and have key indicators as to how the business is performing. They also allow you to make financial comparisons between companies. This video covers the ratios most commonly used to analyze a business. A coproduction of Films for the Humanities & Sciences and MotionMasters.
