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