Essay question: Since there are no perfect or ideal standard ratios for a firm, why is...

Essay question: Since there are no perfect or ideal standard ratios for a firm, why is ratio analysis still considered a valuable management tool?

Expert Solution

We calculated ratios for identifying the firms financial position. We can not say these ratios predict the company accurately. Because no one can say that these ratios will be accurate because these ratios can be considered as a tool. What ratios actually perform in a company? We should make a clear picture of this question.

Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. This will tells whether the company is weak or strong.

So we can say it is very important to calculate the ratios for identifying firms financial position.

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jeff jeffy answered 2 years ago

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Essay question: Since there are no perfect or ideal standard ratios for a firm, why is...

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