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Finance

Profitability ratios

In the first in a series of articles on financial ratios, Chris Bury looks at how we can measure the efficiency of a business in generating a profit

The financial accounts of a firm provide key information about how it is performing. However, looking at the accounting data in isolation offers little insight. Ratio analysis is a technique for analysing a business’ financial performance by comparing one piece of accounting information with another. Financial ratios are particularly useful because they allow us to compare and contrast:

• how different businesses have performed over a period of time

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