Accounts

Usefulness of Accounting Ratio An accounting ratio atomic number 50 be defined as “ quantitative relationship in the midst of ii or more items of the financial statements connected with individually separate”. Accounting ratios atomic number 18 computed from deuce or more figures taken from the financial statements of a companionship in put together to leave behind an meter reading of the financial performance and position of that company. Ratio analytic view caters to the needs of diverse parties cloakested in financial statements. The fasten 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 promise coming(prenominal) events. Managerial control: Ratios can be used as “instrument of control&rdqu o; regarding sales, costs and profit. Facilitates communication: Ratios facilitates the communication affair of oversight as ratios convey the information relating to the present and inbound quickly, forcefully and clearly. Measuring efficiency: Ratios help to know running(a) efficiency by comparison of present ratio with those of the aged working and also with those of the other firms in the industry.

Facilitating investment decisions: Ratios atomic number 18 helpful in computing return on investment. This helps the focusing in exercising effective decisions regarding profitable avenues of investmen t. Useful in measuring financial solvency: ! The financial statements disclose the assets and liabilities in a format. But they do not convey relationship of confused assets and liabilities with each other, whereas ratios indicate the liquidity position of the company and the proportion of borrowed funds to total resources which reveal the short term and large-minded term solvency position of the firm. Inter firm comparisons: Inter-firm comparisons help the focussing to compare its performance...If you want to get a full essay, set it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay