Page 376 - FM Integrated WorkBook STUDENT 2018-19

Chapter 19

The importance of financial ratios

Ratio analysis is the process of comparing and quantifying relationships
between financial variables, such as those variables found in the
statement of financial position and statement of profit or loss of a
company.

Ratios can assist with:

 Measuring the achievement of corporate objectives

 Investment appraisal

 Working capital management

 Capital structure

 Business valuations

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