RATIO ANALYSIS Definition

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RATIO ANALYSIS involves conversion of financial numbers for a firm into ratios. Ratio analysis allows comparison of one firm to another. Since ratios look at relationships inside the firm, a firm of one size can be directly compared to a second firm (or a collection of firms) which may be larger or smaller or even in a different business. Financial Ratio Analysis is a method of comparison not dependent on the size of either firm. Financial Ratios provide a broader basis for comparison than do raw numbers. In the VentureLine database the comparison is conducted against the industry (SIC Code) in which each particular listing is associated.

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INCORPORATION is a legal process through which a company receives a charter and the state in which it is based allows it to operate as a corporation.

FINANCIAL RATIO is the result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focusing on specific relationships.

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