Ratio Analysis

Topics: Financial ratio, Ratio, Financial statements / Pages: 8 (1949 words) / Published: Mar 15th, 2013
Introduction 1.0 Background of the Study In the past decade of economic tendency, Malaysia as one of the developing countries in Asia has confronted various changes and enlargement. Achievement of Malaysia industry deeply affects the economic status of Malaysia. The movement of foreign exchange will increase when investors involve in it. Investors will always invest in good conduct industry because they will earn revenue in the short time period. However, investors need to recognize or to analyze the performance of the company properly before invest and it is not an easy job for an outsider to understand.

By doing the financial statement analysis, it will help the analyst to understand the performance of any company. The analysis of financial statement is a study of establishing meaningful relationship between various financial facts and figure given in financial statement. The basic financial statement included balance sheet and income statement which is the indicating device of profitability and financial soundness of business concern. Simple and valuable elements have been dissected by complex figure that given in financial statement. In addition, significant relationships are established between the elements of the same dissection. Establishing relationships and interpretation thereof to understand the working and financial position of a firm is called analysis of financial statement. Thus, analysis of financial statement is the procedure of establishing and identifying the financial weakness and strengths of the company. 1.1 Meaning of Ratio Analysis Ratio analysis has been view as a primary technique of the analysis of financial statement from various aspects of business. (Brigham & Houston, 2004 p. 95)state” Ratio Analysis involves comparisons. A company’s ratios are compared with those of other firms in the same industry, that is, to industry average figures.” Ratio refers to the relationship expressed in mathematical term among a set of

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