Ratio Analysis Introduction Published accounts are the only regular source of detailed financial information on a company to the vast majority of people interested in its affairs. It is possible to supplement this information from a number of external sources, but as the data tend to be drawn from the same published statements, the value of the additional information lies more in the convenience of its presentation. The data are often summarized in the form of a time series analysis (data relating to the same company over a period of years) or a cross-sectional analysis (data relating to other firms in the same sector as the target company). In many of these summaries, the information is set out in the form of ratios, which not only remove any potential problems of scale between companies of different sizes, but also highlight important relations between different accounting numbers and indicate the direction in which further analysis might profitably be aimed. This chapter will briefly examine the use (and limitations) of such ratios in the interpretation of a company's accounts. Our examples will be based on the following published statements of CIMA plc, a small quoted company whose shares stand at a midmarket price of 310p: Capital and reserves Creditors due after more than one year