• Compare current performance with previous years to see if there is any improvement
• To make comparisons with similar size organisations in similar industry
• To measure an organisation’s profitability
• Allows for better control of expenses
• To show if an organisation has the ability to pay short term debts
• To measure an organisation’s efficiency
• Allows for corrective action to be taken against inefficient areas
• Highlight trends so managers can be aware of profitable periods or problem periods seasonal demand
• Ratios can be historic and therefore not always accurate
• Different financial calculations can alter the ratio
lydiajane74 answered the question on June 1, 2018 at 07:21
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