19.4 USES OF RATIO ANALYSIS
The first few lines of the present chapter have pointed out the usefulness of the financial ratios to those who manage a firm as well as to those who are related to it in any way, such as, creditors, investors, financial analysts and so on. In order to avoid duplication, it is discussed here how the different ratios should be used in order to arrive at any conclusion. In fact, any ratio per se cannot be a perfect indicator of a firm’s performance or financial position unless it is viewed against, or in comparison to some norm. In the generality of cases, the norm is the industry average. For example, if the current ratio in a particular industry is, on an average, 2:1, a firm having current ratio of 2:1 would be said ...
Get Fundamentals of Financial Management, Third Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
