Ratio analysis definition. Analyzing the definition of key terms often provides more insight about concepts. Ratio analysis activities can be defined as – Determination of critical relations between financial statement items as reflected in numerical measures. Ratio analysis is a common tool used to help analyze financial data. A form of ratio analysis is used in many areas to measure performance. Ratio analysis generally takes place after the financial statement have been generated, ratios being used as a tool for better decision making. One of the most common ratios is the current ration which compares current assets to current liability. The current ratio can help determine if a company can pay off upcoming obligations. Ratios are great tools form measuring different companies of different sizes.
