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Ratio Analysis Paper 23 September 2002 CMGT/577– CIS Business Financial Management Facilitator Table of Contents Introduction: 1 Financial Statement Ratios 1 Profitability Ratios 1 Activity Measures 2 Financial Leverage Measures 2 Liquidity Ratios 2 Other Factors 3 Sample Company 3 Citations: 4 Introduction: Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000. Financial Statement Ratios Profitability Ratios The ratios returns on investment (ROI) and return on equity (ROE) are two of the most popular measure of profitability of a company and, along with the P/E ratio, have the most significant value of any of the ratios. The DuPont Model expands on the ROI calc