Ratio Analysis|Uses Of Financial Ratio | Finance I |Management

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Ratio Analysis|Uses Of Financial Ratio | Finance I |Management

Ratio Analysis:

Ratio Analysis is an meaningful technique of measuring operating performance and evaluating managerial performance of a firm. In other words it is an assessment or evaluation of financial activities and mapping the results to point out basic strengths and weakness.

Uses of Financial Ratio

  • It helps to analyze the liquidity position or the ability of the firm to meet its current obligations.
  • It helps to increase the operating efficiency and performance of the firm.
  • It utilizes various assets in generating sales revenue.
  • It is also useful for assessing the long-term solvency or long-term financial viability of a firm by borrowing funds.
  • It helps to compose between the corporations within industry.
  • It is helpful to measure the overall profitability of the organization.
  • It helps to locate the weak spots of business.
  • It is also helpful for making financial decision of firm.
  • It is also helpful for future forcasting, decision making ,corrective actions and cost control.
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