Ratios in business are crucial statistical facts and records that measure the financial status and the current health of a company, whether it is small or large. This ratio analysis refers to the interpretation and analysis of the figures that generally appear in the financial statements like Balance Sheet, Profit, and Loss Account, Fund Flow Statement, etc. If we take ratios in business to be as ratio analysis, then it is considered a process that compares one figure against the other. The students want to access the Business assignment help as offered by BookMyEssay for their college assessment.

It allows users like investors, Government, creditors, shareholders, analysts, etc. to understand the financial statements better. Therefore for interpreting the financial statements, the systematic use of ratios is required for determining the strengths and weaknesses of an organization along with its current financial condition and even its historical performance.

Advantage of Ratio Analysis in a Business

Irrespective of the size of the businesses, there are several advantages of ratios i.e., ratio analysis in business. As discussed earlier, the financial ratios are usually designed to help one evaluate the firm’s financial statement. Generally, the creditors and investors use several financial statements like ratio analysis for determining the profitability and liquidity of a firm. Thus the several advantages of ratios in business are listed as below:

  • The users use ratios for understanding the different environments required for the operation of a company and even analyze the suitability of an investment in a firm.
  • The analyst usually uses the ratios for comparing the performance and operations of a company with those of other firms in a similar industry before investing in it.
  • The financial statements like profitability ratio, i.e., the profit margin on the sales of the company, enable the management to compare, bench marking, and evaluate the company’s performance with its competitors in the industry. The Business assignment  writing help, as offered by BookMyEssay, provides essential knowledge about business to the students.

The Disadvantage of Ratio Analysis in a Business

Apart from its numerous advantages, there are even several disadvantages of ratios in a business. These are as stated below:

  • Often depending on the ratio analysis, the comparison of the two companies from different industries of similar or dissimilar sectors might be misleading. This is because various companies operate in multiple types of industries, each having different environmental conditions such as market structure, regulations, etc. and these factors are quite significant for every company.
  • In several cases, the ratio analysis often explains the relationship between past information, whereas the users using this financial tool are more concerned about the present and future information of a business.
  • The calculation of many ratios in a business using the historical costs often ignores the price level changes due to inflation, which can be unfortunate for a business. The students can access the homework and assignment help in Kolkata from our company by contacting our experienced writers.

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