ABSTRACT
This chapter analyses a company's financial performance. It explains a company's own figures where a buyer may be assessing their own company against a budget for instance or more commonly where assessing supplier's accounts. The first stage of interpretation of accounts examines the absolute figures over a period of ideally three years or more. This will give us an idea of trends without needing any detailed calculations of figures. Financial ratios are ratios that are used to assess a company's performance over a period of time. Ratios may be grouped together in blocks to give a better feel for the interpretation. The basic areas under which ratios may be grouped are as follows: Profitability, financial Status, Activity, and Other Useful Ratios. Gearing ratio is an expression of the longer-term solvency of the company and it relates the amount of long-term borrowed capital in a company to the amount of capital contributed by the shareholders.
