Ratio Analysis

Contents page Introduction……………………page1 Literature review………………page 2 Uses of ratios…………………...Page 2 Types of pecuniary ratios………Page 3 ? Profitability ratios……….Page 3 ? Efficiency Ratios………....Page 4 ? Liquidity Ratios………….Page 5 ? Investment Ratios………..Page 6 Limitations of ratios…………..Page 8 demonstration……………………..Page 8 Introduction. The primary purpose of accounting is to convey information rough the business to management, investors, shareholders, government and other interested parties. However supreme numbers in isolation are generally meaningless. The uses of monetary ratios enable these figures to be related to other figures so as to put them into perspective. A ratio is a diagnostic incision that helps to identify problem areas and opportunities within a company. Literature Review. Shillinglaw Gordon et al (1979), asserts that the basic building block in financial tilt digest is the ratio, a percentage or decimal kin of one number to another. Swanson Ross et al (1988), is of the idea that, Financial analysis is crucial to managers in order to make decisions about operational a business. The Uses of Financial Ratios.

? Managers use them to analyse sometime(prenominal) results to control their business and plan for the future, in budgeting for example. Trends in the equivalent business over a number of years lead show whether it is progressing or deteriorating. ? Investors use the ratios to compare their investors with alternative forms of investments. Results in one business may be compared with results of other businesses; this is overly known as inter-firm comparison, so as t5o see if it is playacting well. ? They are also used by government statisticians who squirrel away tables of national statistics on industry performances. ? Financial analysts compare ratios against the industry norm, aggregate economy and the economys past performance. They would be working for the financial press, trade... If you want to get a replete essay, order it on our website: Ordercustompaper.com

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