Question

Describe how Financial Markets and Ratio Analysis can affect your personal life?

Answer 1

Excess of income over expeses is calles Savings and savings are useless untill they are not invested into profitable investment. When Saving are parked with good investment avenues leads to capital formation. Individual save to increase the value of investment for future uncertainities. Financial market provides a platform where investors can park their savings with goods investment options. Financial market is a network of financial intermediaries where they connect with each other and provides various investment options. various intermediaries in financial market are banks, insurance service providers, financial instutuions etc. These intermediaries offer various investment products like bank deposits, mutual funds, shares and debentures etc. so financial market provides a platform to individual investors where they can park their savings into different investment options on the basis of risk and return.So where to invest the savings is a key factor in individual personal life and this decision is taken by conditions prevailing in the financial market of the economy because economic conditions in financial market can either increase the value of investment or decrease it.

When we select individual securities for investment, first we chcek the financial position of the company issuing the financial securities and this is done by various financial analysis techniques like ratio analysis and common size income statement and trend analysis. so with the help of ratio analysis we first evaluate the financial position of the issueing company and then take appropriate decision whether to investment in securities or not.