Advantages of Ratio Analysis

 Advantages of Ratio Analysis

Advantages of Ratio Analysis

           1. It is used as an aid to simplify the comprehension of financial statement of an organisation.

           2. It is used as an aid to analysis and interpretation of financial statements.

           3. It provides data for inter-firm comparison in regard to operating performance and financial result.

          4. It can be use for comparing the working result of the different division of the same organisation.

         5. Accounting ratio based on past performance is helpful in predicting the future performance of the different division and the business as a whole.

         6. It can help the management in planning and forecasting and provides clues on trend and future problems.

         7. Without going into much details, the position of the business cab be ascertained at a glance by the use of accounting ratio.

        8. Accounting reports can be strengthened by the use of accounting ratio.

        9. It can be use for making investment decisions.