Importance of Ratio Analysis

A very useful analytical tool used by the financial analysts to assess the performance of the company over a given time span. Mostly used by the lenders and the investors to make sure that the company will be able to give return on the investment. Data required to analyse the financial performance always pertain to the past performance in order to judge the future growth of the company.

it is a tool to measure financial health/growth/performance of organisation over a given period from the published reports.

Its usefulness as a tool for the assessment of the state of a business by the owners, prospective investors, and people and institutions who may be considering lending money to the business. Ratio analysis is used to calculate or analyze the financial statements generated from a company in a given period. This information is invaluable in terms of its use as an indicator of the position of a company in a competitive financial market.

It is useful in the analysis of financial statements so as to make decisions on profitability, liquidity,Leverage,turnover and investments decisions.