Financial and management accounts: the basics
Analytical accounting tools
Analysing financial accounts enables you to compare the company's performance against previous years and with its competitors.
Ratios enable you to quickly see the relative value of one thing against another, eg two items on the balance sheet.
Ratio analysis can also be applied to non-financial data. For ease of reference, ratios are often split into the following areas of common control.
| Liquidity ratios | These ratios are used to measure solvency and short-term survival prospects. |
|---|---|
| Capital structure ratios | These ratios measure the adequacy of owners' funding in relation to long-term debt. |
| Activity and efficiency ratios | These ratios measure the operating efficiency of the business in non-financial terms. |
| Profitability ratios | These ratios measure overall profitability and how well the business is using its assets and covering overhead costs. |
To learn how to perform a ratio analysis, read a guide to key accounting ratios on the Lloyds TSB website - Opens in a new window. You can also see our guide on balance sheets: the basics.
Subjects covered in this guide
- Introduction
- Financial accounts
- Filing financial accounts
- Management accounts
- Uses of management accounting
- The importance of maintaining accurate accounts
- Analytical accounting tools
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Actions
- Accounts requirements guidance on the Companies House website - Opens in a new window
- Ratio analysis on the Biz/ed website - Opens in a new window
- Key accounting ratio guidance on the Lloyds TSB website - Opens in a new window
- Financial management online courses on the learndirect business website - Opens in a new window
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