Question

what do you mean by ratio analysis? explain its advantages.

Answer 1

A ratio analysis:

This is a quantitative analysis of information contained in a company's financial statements.

Ratio analysis is used to evaluate various aspects of a company's operating and financial performance.

These include :

1.) Efficiency

2.) liquidity

3.)profitability

4.)solvency.

Answer 2

Ratio analysis is a method by which financial information from a company's accounting books is used to find out the true picture of a company.

It also gives valuable information about the liquidity, solvency and profitability of a company.

The advantages of ratio analysis are as follows -

It is an easier way to understand the accounting figures and look into the financial position of a company.

Makes it easy for a business to predict the future and efficiency of its resources.

Find out the weaknesses of a business and helps it to compare performance with competitors.