Question

wright a paragraph about ratio analysis?

Answer 1

Ratio Analysis:

Ratio analysis is the comparison of line items in the financial statements of a business.Ratio analysis is used to evaluate a number of issues with an entity,such as its liquidity,efficiency of operations,and profitability.This type of analysis is particularly useful to analyst outside of a business,since their primary source of information about an organisation is its financial statements.Ratio analysis is less useful to corporate insiders,who have better access to more detailed operational information about the organisation.Ratio analysis is particularly useful when used in the following two ways:

i)Trend line:Calculate each ratio over a large number of reporting periods,to see if there is a trend in the circulated information.The trend can indicate financial difficulties that would not otherwise be apparent if ratios were being examined for a single period.

ii)Industry comparison:Calculate the same ratios for competitors in the same industry,and compare the results across all of the companies reviewed.Since these businesses likely operate with similar fixed assets investments and have similar capital structures,the results of a ratio analysis should be similar.