Understanding the Concepts Essay Example | Topics and Well Written Essays - 250 words

Understanding the Concepts - Essay Example These include the profit ratios like the Gross Profit & Net Profit Margins, Earnings per share, and Return on Assets, the liquidity ratio like the Current Ratio, and Quick Ratio, the activity ratios like the Average Collection Period, and the Inventory Turnover Ratio, and leverage ratios like the Debt Ratio, and Equity Ratio (Vickers, 2005, p.117). However, in larger corporations, besides the above mentioned ratios, certain other ratios like Accounts Receivable Turnover, Fixed Asset Turnover, Total Asset Turnover, Price-to-earnings Ratio, and Price-to-book value, to name among others (Lee, Lee & Lee, 2009, p.33). These ratios provide with further detailed analysis of a company which a small business might not require unless it is grown big. The above study has reflected on the fact that financial ratios are highly significant for every organization. However, depending on the size of the organization, the need for the different financial ratios to be determined might