Ratio analysis can help in measuring business performance and setting objectives/ goals

Topics: Management, Ratio, Comparison Pages: 2 (426 words) Published: April 15, 2014
‘Ratio analysis can help in measuring business performance and setting objectives/ goals’

Ratios are calculated from an organisation’s financial statements and are an effective business tool in measuring its performance.

By comparing the ratios to those of the previous year it is possible to determine whether a business is doing better this year than last year.

It is also possible to compare ratios of one organisation against those of another in a similar industry. This helps identify areas in which one business is either under performing or indeed is out performing another. Undertaking ratio analysis and making comparisons to market leaders within your industry will help focus on areas which require attention.

By carefully selecting the most suitable ratios business owners and managers can use the results to gain a better understanding of how their organisation is performing. The same ratios can also be used to set future targets.

Ratios are calculated from an organisation’s financial statements and are an effective business tool in measuring its performance.

By comparing the ratios to those of the previous year it is possible to determine whether a business is doing better this year than last year.

It is also possible to compare ratios of one organisation against those of another in a similar industry. This helps identify areas in which one business is either under performing or indeed is out performing another. Undertaking ratio analysis and making comparisons to market leaders within your industry will help focus on areas which require attention.

By carefully selecting the most suitable ratios business owners and managers can use the results to gain a better understanding of how their organisation is performing. The same ratios can also be used to set future targets.

Ratios are calculated from an organisation’s financial statements and are an effective business tool in measuring its performance....
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