Explain three (3) advantages for using ratio analysis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Explain three (3) advantages for using ratio analysis.
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Ratio Analysis: It is a tool used to analyze financial statements. The use of accounting ratios helps the user to derive meaningful insights from the accounting data and the financial statements presented by the company.
The concept of ratio analysis is used by various stakeholders to evaluate and know the profitability, efficiency, leverage, solvency, and other related data about a company. Both vertical and horizontal analysis can be done using financial ratios.
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