Financial Ratio Analysis

Last updated May 9, 2023 Edit

• Business

• Strengths
• Weaknesses
• Opportunities
• Threats

SW → Internal OT → External

• The creation of financial information for use by the internal users within the business in order to predict, plan, review and control the financial performance of the business.

• Management accounting data:

  • Revenue, cost and profit objectives
  • Decision trees
  • Investment data
  • Capital structure data and source of finance
  • Cash flow forecast and outcomes
  • Budget and outcomes
  • Break-even charts
  • Etc

• The provision of financial information to show external users the financial position of the business; it concentrates on historical data.

• Financial accounting data:

  • Cash flow statements
  • Data on profitability
  • Capital structure
  • Sources of finance
  • Income statements
  • Balance sheets

• Profit and loss accounts
• Historical record of the income and expenditure over a period of time (typically the preceding year or quarter)
• Sole trader, private limited company, public limited company
• Gross profit, gross profit margin, net profit, net profit margin

Example income statement

Business