Ratio analysis and its uses, Accounting Basics

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Ratio Analysis: A 'Ratio' is clear as an arithmetical/quantitative/ numerical relationship between two numbers. Ratio analysis is a extremely significant and age old method of financial analysis.

Uses of Ratio Analysis: There are a variety of uses of Ratio Analysis, some of which are like this:

1. It assists in managerial decision making

2. It assists in financial planning and forecasting

3. It assists in communicating the financial strength of a concern

4. It assists in control

5. It is a critical part of budgetary control and standard costing

6. It assists an investor/prospective investor in decision making

7.It offers information to the creditors concerning the solvency of the firm

8.It assists the employees by providing information about the profitability of the concern

9. It assists the government in policy making by provided that financial information about the industry/firm etc

10. It makes easy inter-firm, intra-firm, and firm industry contrast.

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