###### Asked in Investing and Financial MarketsBusiness Accounting and BookkeepingAngel and Venture Capital

Investing and Financial Markets

Business Accounting and Bookkeeping

Angel and Venture Capital

# Nature of Ratio Analysis?

## Answer

###### Wiki User

###### April 30, 2009 6:43AM

(1) Would like to know more about the following question " nature of ratio Analysis" i would be glad to get a better and reasonable answers for that.

Question 2.

(2) Effect of Inflation on Ratio Analysis.

Question 3.

Ratios as Measure of performance.

Question 4.

Performance indicators.

## Related Questions

###### Asked in Accounts Payable, Accounts Receivable, Financial Statements

### What is Liquidity ratio analysis?

RATIO ANALYSIS Meaning and definition of ratio analysis: Ratio
analysis is a widely used tool of financial analysis. It is defined
as the systematic use of ratio to interpret the financial
statements...
measure of a firms ability to meet short term cash payments.
bassically liquidity ratios show how good a business is at paying
off its debts. hope this helps :)
liquidity ratios include current ratio (which is current
assets/current liabilities) and acid test (which is current assets-
stock/current liabilities.) liquidity ratio's shows how good a
business is...

###### Asked in Budgeting and Forecasting

### What is the meaning of ratio analysis types of ratio analysis importance of ratio analysis?

RATIO ANALYSIS Meaning and definition of ratio analysis:
Ratio analysis is a widely used tool of financial analysis. It
is defined as the systematic use of ratio to interpret the
financial statements so that the strength and weaknesses of a firm
as well as its historical performance and current financial
condition can be determined. The term ratio refers to the numerical
or quantitative relationship between two variables. Significance or
Importance of ratio analysis:
•
It helps in evaluating the firms performance:
With the help of ratio analysis conclusion can be drawn
regarding several aspects such as financial health, profitability
and operational efficiency of the undertaking. Ratio points out the
operating efficiency of the firm i.e. whether the management has
utilized the firm's assets correctly, to increase the investor's
wealth. It ensures a fair return to its owners and secures optimum
utilization of firms assets •It helps in inter-firm comparison:
Ratio analysis helps in inter-firm comparison by providing
necessary data. An interfirm comparison indicates relative
position.It provides the relevant data for the comparison of the
performance of different departments. If comparison shows a
variance, the possible reasons of variations may be identified and
if results are negative, the action may be intiated immediately to
bring them in line. •It simplifies financial statement:
The information given in the basic financial statements serves
no useful Purpose unless it s interrupted and analyzed in some
comparable terms. The ratio analysis is one of the tools in the
hands of those who want to know something more from the financial
statements in the simplified manner.

###### Asked in Numbers

### How does the golden ratio relate to the Fibonacci sequence?

The golden ratio is approximately 1.618: 1. This ratio is
commonly found in nature and architecture. Stock traders often look
for this ratio in patterns on stock charts. One way to compute this
ratio is to compare any adjacent Fibonacci numbers. For this reason
stock traders often refer to this type of analysis using the term
Fibonacci, as in "Fibonacci retracements".

###### Asked in Business & Finance

### What are some of the problems with ratio analysis?

There are many limitations, or "problems" with ratio
analysis.
Ratio analysis only gives a numeric result of a formula, but it
does not tell you why a result is gained. To be useful, the
result therefore needs to be further analysed.
Anyone can plug numbers into a formula, but the figures need to
be related to the actual scenario/organisation in question to find
out why a result is such as it is.
A further problem with ratio analysis is that different
people/organisations can use different basis upon which to build a
result. For example, "how profitable is my company?" .... we can
calculate operational profit, net profit, gross profit and get very
different answers, but still be talking about profitability.
Ratio analysis is also subject to potential manipulation to make
a result "look better".