|  Financial ratio gives out a detail report with reference to firm’s performance and financial situation. Financial Ratios are exercised to examine the trends and for comparing the firm’s financial state with the other firms. Thus, by such means, it will not be difficult to come across the potential problems.
Ratio analysis is a tremendous method for making the judgments between your business and other businesses in your industry. It determines the overall financial condition of your business organization that helps in formulating a strategic decision. There are six types of ratios. Those are:
1) Profit Ratio.
2) Solvency Ratio.
3) Asset Turn Over Ratio.
4) Gearing or Leverage Ratio.
5) Cash Flow Statement Ratio.
6) Return on Capital Employed.
Financial Analysis Ratio is more or less like a “Benchmarking” where ratios are of an essence to make the comparisons so that you can evaluate your business performance against the other. Hence, to conclude, by means of Financial Analysis Ratio, one may determine whether the organization is doing average or better or worse than others. By having access to this knowledge, one would be able to take the wise decision. |
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