As discussed earlier that one of the tools for the analysis of financial
statements is the ratio analysis. This analysis describes a particular relationship
between elements of one with the other elements in a financial report. Financial
statements referred to is the balance sheet and income statement. Balance sheet shows
assets, debt and the company's capital at a given time. Income statement reflects the
results achieved by the company within a certain period (usually one year).
Financial ratio analysis of a company used to assess the situation and trends
also measure the performance of management. Through analysis of the ratio can be
used as a basis to assess whether management's performance has reached a
predetermined goal or not, and early knowing on trends or trends that management
performance can be anticipated earlier.
The results of analysis can be used to observe the weakness of the company
during the period of time to walk, is there any weaknesses in the company can be
repaired, while the results are good enough to be maintained in the future. Further
historical ratio analysis can be used for the preparation of plans and policies in the
coming years in order to determine the right policy direction