## Users of Financial Analysis & The Ratios They Care About
Financial statement analysis converts raw accounting data into derived information about a firm. Different stakeholders read the same statements but look for different things — so each user group gravitates toward a different family of ratios.
### The big idea
A ratio is only meaningful relative to who is asking and why. Match the user → their objective → the ratio family.
### Users → Objective → Ratios
| User | What they want to know | Ratio family |
|---|---|---|
| Shareholders | Profitability & growth | Profitability ratios — EPS, DPS, P/E, Dividend Payout |
| Investors | Overall financial health & future prospects | Profitability, Capital Structure, Solvency, Turnover |
| Lenders | Safety of money lent (long-term) | Coverage, Solvency, Turnover, Profitability |
| Creditors | Ability to pay short-term dues | Liquidity, Short-term Solvency |
| Employees | Health vs competitors | Liquidity, Long-term Solvency, Profitability, ROI |
| Regulator / Govt | Taxation & statutory payments | Profitability |
| Managers | Decision-making | Varies by role (see below) |
### Managers — by function
- Production Manager → Input-output ratio, Raw Material Consumption ratio
- Sales Manager → Turnover ratios (e.g., Receivable Turnover), Expense ratios
- Financial Manager → Profitability (ROI), Turnover, Capital Structure ratios
- CEO / General Manager → All ratios (overall perspective: sales, finance, inventory, HR, production)
### Industry-specific ratios
Financial managers also benchmark against industry norms, and each industry has its own signature ratios:
- Telecom → Call ratios; Revenue & Expenses per customer
- Bank → Loan-to-Deposit ratio; Operating Expense & Income ratios
- Hotel → Room Occupancy ratio; Bed Occupancy ratio
- Transport → Passenger-Kilometre; Operating Cost per Passenger-Km
### How to use this in an exam
If a question says "a banker is evaluating a short-term loan," reach for liquidity/coverage ratios, not EPS. The examiner is testing whether you can map the user's perspective to the right tool.