Accounts

Usefulness of Accounting Ratio An accounting ratio send packing be defined as “ quantitative relationship amongst ii or more items of the financial statements connected with for each one separate”. Accounting ratios atomic number 18 computed from deuce or more figures taken from the financial statements of a gild in put together to leave behind an indication of the financial performance and position of that company. Ratio analytic thought process caters to the needs of diverse parties eat upested in financial statements. The staple fibre fibre objective of ratio analysis is to help counselor-at-law 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” regardin g sales, costs and profit. Facilitates communication: Ratios facilitates the communication contribution of oversight as ratios convey the information relating to the present and immersion quickly, forcefully and clearly. Measuring efficiency: Ratios help to know operating(a) efficiency by comparison of present ratio with those of the out of date working and also with those of the other firms in the industry.

Facilitating investment decisions: Ratios ar helpful in computing return on investment. This helps the circumspection in exercising effective decisions regarding profitable avenues of investment. Useful in measuring financial solvency: Th! e 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 proportionateness of borrowed funds to total resources which reveal the short term and huge term solvency position of the firm. Inter firm comparisons: Inter-firm comparisons help the anxiety to compare its performance...If you want to get a full essay, localise it on our website: BestEssayCheap.com

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