Ratio Analysis



Ratio Analysis

Discussion 1

Ratio analysis is used for analyses of financial statements to get a quick signal of a company's financial performance in various key areas. They identify trends of a company over a period of time or can be used to compare two companies at a single point in time and eliminate the impact of size of companies to make the comparison meaningful (Drake, 2012)

However, the use of ratio analysis may mislead the analyst because of the nature of financial statements. Financial statements are prepared on the basis of accrual basis of accounting. Many items other than cash ...