Finance Fundamentals for Non-Finance Managers Key Financial Ratios Ratios describe the various relationships among accounts in the balance sheet and income statement. These primary analytical tools of financial analysis are used to judge the financial health of an institution, and to project future earnings and cash flow. Investors and lenders use ratios to determine the health of an organization and the risk associated with lending or investing funds in it. Management within your organization use ratios to prepare pro forma projections and to portray how their institution is doing financially to the Board.
Ratios describe the various relationships among accounts in the balance sheet and income statement.
These primary analytical tools of financial analysis are used to judge the financial health of an institution, and to project future earnings and cash flow. Investors and lenders use ratios to determine the health of an organization and the risk associated with lending or investing funds in it. Management within your organization use ratios to prepare pro forma projections and to portray how their institution is doing financially to the Board. To understand how your pro forma results are used as part of the financial plan let s look at key financial ratios. You should recognize all of the elements of the formulas from the previous sections.