Introduction Companies and other business organizations exist in order to offer benefits to their stakeholders. From year to year, the management, shareholders, customers, lenders, employees and the government are interested in the trend of their business’ performance so as to make important decisions. The financial statements are usually not effective in giving information sufficient to make decisions. An analysis of the financial information from one year to the next is necessary in order to provide important information that can be used for decision making by the various stakeholders. Ratio analysis is a means of making comparisons between the financial variables in the statement of incomes and the statement of financial position (Robinson, Munter, & Grant, 2003). The ratios calculated are an indication of an organization’s performance by comparing the current year’s ratio with those of previous years or comparing the ratios with a benchmark (Brealey, Myers, & Marcus, 2007). Purpose of ratio analysis Ratio analysis of a company’s financial statements is performed for a variety of reasons. The main reason for ratio analysis is to show the performance of the company (Siddiqui & Siddiqui, 2005). It shows the company’s financial condition in the present year, thus giving an indication of whether a fair return on investment has been generated. Secondly, ratio analysis is an important tool for comparison of performance of the current year relative to the previous year, showing whether the company’s performance has improved or deteriorated (Siddiqui & Siddiqui, 2005). By observing the trend, investors and other stakeholders can make decisions regarding their future engagement with the company. Finally, ratio analysis highlights the company’s areas of strengths and weaknesses (Brealey, Myers, & Marcus, 2007). Classification of ratios There are various ratios that are derived from a company’s statement of comprehensive income and the statement of financial position. These ratios are classified into five main classes; liquidity ratios, leverage or gearing ratios, activity ratios, profitability ratios and investors’ ratios. Liquidity ratios are computed in order to measure the ability of the organization to settle its current debts. Leverage or gearing ratios are used to measure the extent to which a company uses funds from external sources to finance its operations (Brealey, Myers, & Marcus, 2007). Activity ratios, also referred to as turnover ratios, are used to measure the efficiency with which a company utilizes its assets in order to generate sales revenue. Profitability ratios are used to show the effectiveness of managers by indicating how successful they are in generating profits for the company. Finally, investment or equity ratios are used to evaluate the overall score of the company, for example, to determine the company’s theoretical value of a share and the effect of a right’s issue on the company’s earnings per share. Ratio analysis for two healthcare companies The table is an analysis of two ratios for two healthcare companies; The University of North Carolina Health Care System and Northwestern Memorial Healthcare and Subsidiaries. The analysis is based on the financial statements of the companies for the years ended 30 t