Business Ratios and Formulas: A Comprehensive Guide

This is a great reference book for Financial Statement Ratio Analysis. Unlike some other ratio analysis books, this one has more ratios than you would ever need to use even in the most in-depth analysis of a companies financials. The layout of the book flows naturally, meaning that the book divides the ratios into categories like Liquidity, Solvency, Performance, Return on Investment, etc... the one shortfall here is though you'd expect the ratios to flow from one into the other as you pick a category and investigate it, you'd be wrong. For example, The Current, Quick, and Cash ratios are some of the most important starter ratios for Liquidity test and you'd expect the section on Liquidity to start with them, but it doesn't. It starts with Accounts Receivable Turnover ratio followed by Average Receivable Collection Period. Although that is important, it's not where one typically starts during a liquidity test, so the author could have organized the ratios with a little more thought. Nevertheless, this disadvantage is outweighed by the advantage of having a good explanation of what each ratio means with a hypothetical example for every single ratio. It's my conclusion that this book is made for people with an existing knowledge of Accounting. Beginners would have a difficult time with this, as the book is filled with jargon. Accountants and professional analysists would love this, because all the jargon just saves us time. We hate it when books like these try to cater to everyone, including amateurs, and in the end just 'water down' the content. We just want that ratio and a quick explanation in OUR language of what it means and how to interpret it. This book does just that. If you're looking for a Ratio reference book, you should definitely have this one as part of a larger collection, since having one ratio reference book is not enough and you always need to cross-reference if you get lost along the way.