Accounts

Usefulness of Accounting Ratio An accounting ratio clear be defined as “ quantitative relationship betwixt ii or more items of the financial statements connected with distributively separate”. Accounting ratios atomic number 18 computed from two or more figures taken from the financial statements of a come with in put together to leave behind an reference of the financial performance and position of that company. Ratio analytic idea caters to the needs of diverse parties secreteested in financial statements. The raw material fibre objective of ratio analysis is to help counseling 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 prognosticate coming(prenominal) events. Managerial control: Ratios can be used as “instrument of control” regarding sales , costs and profit. Facilitates communication: Ratios facilitates the communication do of oversight as ratios convey the information relating to the present and in(prenominal) quickly, forcefully and clearly. Measuring efficiency: Ratios help to know operative efficiency by comparison of present ratio with those of the sr. working and also with those of the other firms in the industry.

Facilitating investment decisions: Ratios be helpful in computing return on investment. This helps the focus in exercising effective decisions regarding profitable avenues of investment. Useful in measuring financial s olvency: The financial statements disclose ! the assets and liabilities in a format. But they do not convey relationship of various(a) assets and liabilities with each other, whereas ratios indicate the liquidity position of the company and the residue of borrowed funds to total resources which reveal the short term and tolerant term solvency position of the firm. Inter firm comparisons: Inter-firm comparisons help the direction to compare its performance...If you want to get a full essay, range it on our website: BestEssayCheap.com

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