... to choose? That's easy, by looking at the four classification of ratios, as defined by Stittle, "profitability, liquidity, efficiency and financial (investment)" (Stittle). These ratios give an idea of each company's performance, financial strength and how they compare to other companies. In Understanding Financial Statements for Non-Financial Professionals, computations of ratios, such as the acid test, sales to inventory and the current ratio, are illustrated using a company's financial statements (11). While financial statements are prepared by management for making decisions about its operations, these documents provide the vital information for an investor to see how they are actually performing. For another example, consider that you are a business owner in search of a commercial loan from a bank. What will they want to know about your company? What numbers will be important to them? According to DiLorenzo, the banks will be ensuring that two ratios, debt-service-coverage and debt-to-income, are within their ...

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