Analysis Of Ratio Analysis

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4. DATA ANALYSIS & INTERPRETATION

TREND ANALYSIS:
In fiscal examination the course of progress over a time of years is of starting significance. Time arrangement and pattern investigation of proportion shows the method for changes. This kind of study is transcendently pertinent to the yield and misfortune account. It is reasonable that pattern of offers and net pay may be considered in the light of two variables. The general value level that may be found by and by is that various firms would be indicated at diligent development over time of years however to get a true pattern of development, the business figure ought to be balanced by a suitable record of general costs.

Proportion examination empowers a firm to take the time measurement …show more content…

The first task of the financial analyst is to select the information relevant to the decision under consideration from the total contained in the financial statement.
A ratio is a simple mathematical expression. It is a number expressed in terms of another number, expressing the quantitative relationship between the two. Ratio analysis is the technique of interpretation of financial statements with the help of various meaningful ratios. Ratios do not add to any information that is already available, but they show the relationship between two items in a meaningful way, which helps us to draw certain conclusions. Comparisons with related facts are the basic of ratio analysis.
Ratio may be used Comparison of a firm with its own performance in the part.for comparison in any of the following ways
 Comparison of one firm with another firm in the industry.
 Comparison of one firm with the industry as a whole.
 Comparison of an achieved performance with pre-determined standards.
 Comparison of one department of a concern with another …show more content…

The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due the liquidity ratios are particularly useful in credit analysis by banks and other supplier of short–term loans. Long-term solvency: Ratio analysis is equally useful for assessing the long term financial viability of the firm the long term solvency is measured by the leverage / capital structure and profitability ratios, which focus on earnings power and operating efficiency ratio analysis, reveals the strength and weakness of a firm in this respect.
Operating efficiency: It is relevant from the viewpoint of management and it throws light on the degree of efficiency in the management and utilization of its assets. The ultimate analysis depends upon the sales revenue generated by the use of its assets total as well as its components.
Overall profitability: In this the management is constantly concerned about the overall profitability of the enterprises. They are concerned about the ability of the firm to meet its short terms as well as long-term obligations to its creditors to ensure a reasonable return of its owners and secure optimum utilization of the assets of the

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