RATIO ANALYSIS

A ratio is used as a yard stick for evaluating the financial position and performance of a firm. Ratio analysis is the process of establishing liquidity, solvency and profitability of a concern. Ratio analysis can be used by the management as a means of checking up on the efficiency with which working capital is being managed in the enterprise. This is the most important tool available to financial analysts for their work. An accounting ratio shows the relationship in mathematical terms between two inter related accounting figures. Ratio analysis simplifies the comprehension of financial statements. Ratio calculated here on the following ways: a) Assessing the liquidity. b) Assessing the solvency position. c) Assessing the efficiency in resource utilization. d) Assessing the profitability of the firm.