Meaning, objectives, and nature of ratio analysis.

Meaning, objectives, and nature of ratio analysis.

A ratio expresses the numerical relationship between two numbers. In the words of Kennedy and McMullen, “the relationship of one item to another expressed in simple mathematical form is known as a ratio”. Thus, the ratio is a measuring device to judge the growth, development and present condition of concern. It plays an important role in measuring the comparative significance of the income and position statement. Accounting ratios are expressed in the form of time, proportion, percentage, or per one rupee. Ratio analysis is not only a technique to point out the relationship between two figures but also points out the devices to measure the fundamental strengths or weaknesses of a concern. read more