Written By: Ruth H. Lytton, E. Thomas Garman and Nancy M. Porter

Use of financial ratios as a diagnostic and informational tool has become increaslingly popular in financial counseling and planning situations. Results of ratio analysis suggest insights not readily apparent from merely studying a balance sheet and an income and expense statement. Nine financial ratios are presented, defined, calculated, and interpreted using an illustrative case family. Application of the financial ratios by practioners, educators, and researchers will further clarify their usefulness for providing feedback on the financial situation, for measuring change in financial status over time, and for providing recommendations to clients. Key Word: financial ratios

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