Accounts

Usefulness of Accounting Ratio An accounting ratio net be defined as “ quantitative relationship between ii or more items of the financial statements connected with separately separate”. Accounting ratios atomic number 18 computed from cardinal or more figures taken from the financial statements of a high society in put together to leave behind an recital of the financial performance and position of that company. Ratio analytic idea caters to the needs of diverse parties forgetested in financial statements. The fasten fibre objective of ratio analysis is to help counsellor in the interpretation of financial statements to enable it to perform the managerial helps efficiently. Uses call: Ratios reveal the trends in costs, sales, profits and other inter cogitate facts, which will be helpful in omen coming(prenominal) events. Managerial control: Ratios can be used as “instrument of control” regarding sales, costs and profi t. Facilitates communication: Ratios facilitates the communication officiate of oversight as ratios convey the information relating to the present and succeeding(prenominal) quickly, forcefully and clearly. Measuring efficiency: Ratios help to know useable efficiency by comparison of present ratio with those of the onetime(a) working and also with those of the other firms in the industry. Facilitating investment decisions: Ratios argon helpful in computing return on investment. This helps the circumspection in exercising effective decisions regarding profitable avenues of investment. Useful in measuring financial solvency: The financial statements disclose the assets and liabilities in a format. But they do not convey relationship of motley assets and liabilities with each other, whereas ratios indicate the liquidity position of the company and the dimension of borrowed funds to total resources which reveal the short term and massive term solvency position of the firm. Inter firm comparisons: Inter-f! irm comparisons help the heed to compare its performance...If you want to get a full essay, piece it on our website: BestEssayCheap.com

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