Financial Ratio Analysis - Part - 1 - The simplest ever explanation of the concepts and major types

The video introduces financial ratio analysis as a tool for assessing a company's financial health. It discusses two scenarios where this analysis is crucial: for investors comparing companies and for business owners planning expansion. The video explains key types of financial ratios, including liquidity, profitability, and leverage ratios, and their significance in decision-making. It concludes with a call for viewer engagement for more detailed content.

What is the primary purpose of financial ratio analysis?

• To evaluate employee performance

• To determine a company's market share

• To assess a company's financial health

• To analyze customer satisfaction

In the context of financial ratio analysis, what is a key consideration for an investor?

• The company's location

• The company's employee benefits

• The company's profitability compared to others

• The company's marketing strategy

What is the current ratio used to measure?

• A company's ability to pay its debts

• A company's market value

• A company's customer base

• A company's employee turnover

What does a high current ratio potentially indicate?

• The company is understocked

• The company is over-leveraged

• The company may be holding too much stock

• The company has low profitability

Which ratio is used to assess a company's profitability?

• Profit margin ratio

• Equity ratio

• Current ratio

• Debt ratio

What does a lower debt ratio indicate about a company?

• The company is safer financially

• The company is expanding rapidly

• The company has high profitability

• The company is more financially risky

Why is generating profit more important than just increasing sales?

• Because profit indicates financial health

• Because sales do not affect the balance sheet

• Because sales are not important

• Because profit is easier to measure