Financial statements are usually interpreted by accountants and users of the
financial statements by means of calculating different relevant accounting ratios in
order to assess the strengths and weaknesses which may exist within the company’s
operations.

This chapter will cover ratios which focus on;
– Use of resources and working capital

Upon calculation of these ratios, these are analysed and interpreted and
comparisons can then be made with previous years performances, or with other
companies in the same industry, or with industry averages/ standards. It is always
important to analyse and interpret the ratios to assess the viability of the business
and analyses can be made for management use, investors, shareholders or other
stakeholders.