Pick up the correct statement from the following: A. Ratio analysis is the procedure of determining and interpreting numerical relationship of various items of the financial statement B. All financial ratios are obtained by relating two sets of information contained in a Single financial statement C. The relationship between two accounting figures expressed mathematically, is known as a financial ratio D. All of these

The correct answer is D. All of these.

Ratio analysis is the procedure of determining and interpreting numerical relationship of various items of the financial statement. It is used to assess the

financial health of a company. All financial ratios are obtained by relating two sets of information contained in a Single financial statement. The relationship between two accounting figures expressed mathematically, is known as a financial ratio.

Here are some examples of financial ratios:

• Current ratio: This ratio measures a company’s ability to pay its short-term debts. It is calculated by dividing current assets by current liabilities.
• Quick ratio: This ratio is similar to the current ratio, but it excludes inventory from current assets. This is because inventory is often the least liquid of a company’s current assets.
• Debt-to-equity ratio: This ratio measures the amount of debt a company has relative to its equity. It is calculated by dividing total debt by total equity.
• Return on assets (ROA): This ratio measures how efficiently a company is using its assets to generate profits. It is calculated by dividing net income by average total assets.
• Return on equity (ROE): This ratio measures how efficiently a company is using its equity to generate profits. It is calculated by dividing net income by average total equity.

Financial ratios can be

used to compare a company’s performance over time, to compare a company’s performance to its competitors, and to compare a company’s performance to industry averages.