This week we will be learning about the key business ratios that are so important for business owners, managers and potential investors to understand since they are really the best way of measuring how the company is performing when compared to other companies in the same industry, and they can very quickly show us what is working well and where there are problems that need to be addressed.

Using ratios to calculate various aspects of a business helps to uncover problems or problematic trends that sometimes aren't obvious in a visual review of the financial statements. This is the financial version of a diagnostic test on the business's health. This enables the business manager or owner to compare how their business is performing against their competition and how their business is performing as compared with the entire industry segment. Potential lenders and investors also use these ratios as a component in their decision making to either extend credit or invest in the business.

Module Objectives

Upon the completion of this module, you will be able to:

Explain the purpose for calculating profitability, liquidity, solvency and activity ratios
Analyze of business using financial ratios and draw conclusions about its performance

Content/Activities

- Before class:
  - Read the following publications from Zion's Bank:
    - - How to Analyze Your Business Using Financial Ratios
        
        How to Analyze Profitability
  - Review the PowerPoint presentation on ratios
  - Complete the pre-class quiz
- During class:
  - Each team will select 2 ratios from each of the four ratio types and analyze their two companies, compare the results and provide a narrative (PowerPoint slides) describing which company is performing better.