The Uses and Kinds of Financial Ratios
Financial Ratios itself has no meaning; it must be compared with the criteria to be used. There are two types of cross-sectional analysis: 1) trend analysis that is the ratios obtained in different years and ratios of different years compared indicates development and underdevelopment of company’s financial state over the years. For any kind of functional aspects a kind of ratio can now be used. Analysts use ratios as a common tool to identify the strengths and weaknesses of a company. However, this ratio is only realized the complications and the symptoms and not the primary issue or problem. If the ratio is too high or low, it is important to realize an event in the company, however, cannot obtain enough information.