From the course: Running a Profitable Business: Understanding Financial Ratios
Join today to access over 22,600 courses taught by industry experts or purchase this course individually.
What financial ratio analysis can NOT do
From the course: Running a Profitable Business: Understanding Financial Ratios
What financial ratio analysis can NOT do
- All right, let's be clear about what financial ratio analysis cannot do. - First, financial ratio analysis can't do anything if the underlined financial statement data are not reliable. - If you are doing an important analysis make sure the data come from a reliable source. If the data come from a person you can trust, good. If you aren't sure about the source it's a good idea to have the numbers checked by an outside party, an auditor. - For example, a friend of mine asked me to analyze the numbers of a business he was thinking of buying. It didn't take me long to realize that the financial numbers for this family business were hopelessly mixed in with the personal family expenses. Such as: gas and utilities and groceries. It was impossible to figure out how much income the business was actually generating. Without reliable data it was extremely risky to try to evaluate the business. In the end my friend decided not to…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.