Financial Ratios

Financial ratios, often called accounting ratios are used in the financial analysis by comparing two financial items extracted from the financial statements. Financial ratio is defined as The relationship between two accounting figures expressed mathematically. The financial ratio helps to find out the performance of the firm over the years and its state of affairs. It used to analyze the functional effectiveness of the firm comparing with the competing firms. Financial ratios help to compute various financial statements and formulate new business-investment policies or to arrive at any management decision. The financial statement prepared with the help of financial ratios is an aid to find out the efficient operation of the business for the share holders, competitors, and outsiders who