Accounting Ratios . Ratio Analysis

Ratio analysis is an important analytical tool to use when analyzing the financial statements and there are a lot of ratios when it comes to this type of analysis. You need to understand each one in order to make better decisions about the business and evaluate its overall financial health. If you were analyzing a business and they had:

• A current ratio of 1.4
• Debt ratio of .8
• Number of days’ sales in inventory of 20
• Return on equity of 40%

What would be your overall assessment of the business and why? What additional information would you want to look at and why?