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Methodological issues with financial ratios - Essay Example
Finance & Accounting
Pages 5 (1255 words)
Methodological Issues with Financial Statements Contents Methodological Issues with Financial Statements 1 Contents 2 Introduction 3 Use of Financial Ratios 3 Critical Analysis 4 Conclusion 6 Reference: 7 Introduction Ratio analysis is an important tool to analyze the performance of a company, to predict about the future and doing the comparable analysis of two firms, in the same industry or different industry…
The paper is an attempt to analyze the accuracy of the statement taking the evidence from the last 10 years from the research work published. Use of Financial Ratios Financial ratios are used by the company stakeholders as they have different kind of interest in the concerned company. The shareholders assess the ratios and take the decision whether the performance of the company would be profitable for them, thereby take the investment decisions. The company management analyzes the flaws of the performance of past years and tries to improve it in the future years using ratio analysis tool. The creditors of the company try to find that the company is creditworthy anymore or not (Moyer, McGuigan and Kretlow, 2008, p.58). By doing the comparable analysis of ratios an investor or a prospective investor take the decision that which firm is better to invest, from where they can get the best return when the company management has the interest that how their company is performing with respect to the industry standard (Hitchner, 2011, p.103). When doing the ratio analysis for the above mentioned various purposes then the user should make sure that he has considered the various factors which affect the variables of the ratio. ...
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