In this chapter, we have learned about the importance of ratio analysis. We have seen that there are thousands of ratios, but we have learned that not all will be relevant in any given situation. We looked at how to identify the five main groups of ratios and worked through examples from all five groups.
In the next chapter, we will look at absolute (by discounted cash flow) and relative (by comparative measurements) methods of valuation. We will cover the concept of the time value of money and use it extensively in our calculations. We will learn about several concepts, including free cash flow, the weighted average cost of capital, and terminal value, among others.