Trusted since 2008
Chat on WhatsApp

BAC 207: Fundamentals of Accounting II Notes on Ratio Analysis

KES 100
Secure M-PESA Paybill • Instant digital delivery
View all Notes.
649 Views
1 Purchases

Summary

Ratio Analysis

Ratio

A ratio is a simple arithmetical expression of the relationship of one number to another. It is an expression of the quantitative relationship between two numbers

Managerial Uses of Ratio Analysis
The following are the important managerial uses of ratio analysis –
a. Helps in Financial Forecasting: Ratio analysis is very helpful in financial forecasting. Ratios relating to past sales, profits and financial position form the
basis for setting future trends.
b. Helps in Comparison: With the help of ratio analysis, ideal ratios can be composed and they can be used for comparing a firm's progress and performance.
Inter-firm comparison or comparison with industry averages is made possible by the ratio analysis.
c. Financial Solvency of the Firm: Ratio analysis indicates the trends in financial solvency of the firm. Solvency has two dimensions-long-term solvency and shortterm solvency. Long-term solvency refers to the financial viability of a firm and it is closely related with the existing financial structure. On the other hand, shortterm solvency is the liquidity position of the firm. With the help of ratio analysis conclusions can be drawn regarding the firm's liquidity and longterm solvency position.
d. Evaluation of Operating Efficiency: Ratio analysis throws light on the degree of efficiency in the management and utilization of its assets and resources. Various activity ratios measure this kind of operational efficiency and indicate the guidelines for economy in costs, operations and time.
e. Communication Value: Different financial ratios communicate the strength and financial standing of the firm to the internal and external parties. They indicate the over-all profitability of the firm.
f. Others Uses: Financial ratios are very helpful in the diagnosis of financial health of a firm. They highlight the liquidity, solvency, profitability and capital gearing etc. of the firm.

Draw Backs of Ratio Analysis
a. Limited use of a single ratio: Ratio can be useful only when they are computed in a sufficient large number. A single ratio would not be able to convey anything.
At the same time, if too many ratios are calculated, they are likely to confuse instead of revealing any meaningful conclusion.
b. Effect of inherent limitations of accounting: Because ratios are computed from historical accounting records, so they also possess those limitations and
weaknesses as accounting records possess.
.............

You’re viewing a preview. Buy now to unlock the full document and download instantly after M-PESA payment.

  • Page 1 – BAC 207: Fundamentals of Accounting II Notes on Ratio Analysis – Kenyaplex
........

This is the end of this document preview. Buy to download the complete document.

Recommended Resources

More Resources


  • Certificate in Plumbing Complete Notes

    Certificate in Plumbing Complete Notes INTRODUCTION TO PLUMBING Specific objective a. Narrate the history of plumbing trade b. State relationship existing between plumbing and other building...

    Price: KES :  100

  • Clinical Medicine: General Surgery Complete Notes

    Download complete Clinical Medicine General surgery complete notes SURGERY MODULE 1 SURGERY 1 It has three units: 1. General introduction to surgery 2. Soft tissue...

    Price: KES :  200

  • Digital Literacy Complete Notes

    Enhance your digital literacy with comprehensive notes. Purchase now and receive instant delivery via WhatsApp, email, or direct download. 1.1 Determine concepts of ICT in accordance with computer...

    Price: KES :  250

  • ISC 207 Management Information Systems Notes

    Full notes on management of information systems. Get the full notes here Brief Overview: System Concept A system is an organized, purposeful structure regarded as a whole and consisting of...

    Price: KES :  200

  • Laboratory Manual on the Determination of Electrical Conductivity and Salinity of Water

    This is a laboratory manual on the determination of electrical conductivity and salinity of water Experiment: Determination of the conductivity and salinity of water Introduction Conductivity is a...

    Price: KES :  500

  • Kenyatta University EMP 201: Curriculum Development Notes

    Document Length: 9 pages. The notes are all about curriculum Implementation and Teacher education, the definition of Curriculum Implementation, Strategies for Curriculum Implementation, Agencies of...

    Price: KES :  150

  • Internet and Networking Revision Notes: Module III diploma in ICT

    These are revision questions and answers for module III diploma in ICT. They are very understandable Q&A for exam preparation. DATA COMMUNICATION AND NETWORKS 1. Define the term Computer...

    Price: KES :  200

  • TPR 202 Ethics/Introduction to Ethics Notes

    These are the ethics notes from a researched background and they help one understand about social science. Please read and at the end of it you will benefit, am sure. TPR 202 ETHICS/ INTRODUCTION...

    Price: KES :  150

  • Sociology Notes: Scope of Sociology

    Sociological theory: A theory refers to a statement of general principles which try to explain the nature of things. A sociological theory is, therefore, a branch of sociology that attempts to...

    Price: KES :  200

  • Conflict of Laws With Regard to Marriage

    Introduction According to Fawcett, private international law (Conflict of Laws) is that part of domestic law which comes into operation whenever the court is faced with a claim that contains...

    Price: KES :  1500

  • CLS 401: Professional Ethics Notes

    Notes on Professional Ethics and practice for Law students, neatly summarized for easier reading and understanding. Each topic is outlined clearly. The notes cover most topics taught in professional...

    Price: KES :  2000

  • EMA 412: Economics and Planning of Education Notes 4th year

    These are lectures note for EMA412:ECONOMICS AND PLANING OF EDUCATION for 4th year for education students. Brief Overview: Educational Planning Is a conscious and deliberate Government effort...

    Price: KES :  300

  • EMA 411: Educational Management and Administration Notes

    These are lecture notes of EMA 411.EDUCATIONAL MANAGEMENT AND ADMINISTRATION for 4th year students for teaching and reading. Brief Overview: Organization – refers to the structure and...

    Price: KES :  200

  • AEC 418: Project Appraisal and Evaluation - Introduction to Project Appraisal Notes

    Content: This is an introduction to project appraisal and evaluation. 1. Introduction A project appraisal should entail the following: 1) A presentation and discussion of the socio-economic...

    Price: KES :  300

  • AEC 418: Project Appraisal and Evaluation - Financial Appraisal Notes

    This is a well illustrated topic about financial appraisal in the course project appraisal and evaluation. This topic has the following subtopics: (i) Total investments costs (ii) Fixed...

    Price: KES :  50

  • ENS 2100: Urbanization and environment Notes (One Sub-topic)

    This contains only one sub-topic about the environment and urbanization well written and summarized Brief Overview: URBANIZATION AND ENVIRONMENT. In this paper we are going to discuss the...

    Price: KES :  10

  • Professional Theory and Practice

    This work gives the definition, history, concepts, nature, the empirical formulation, value & ethics, practice model, perspectives and practical interventions of behavioral theory. It gives clear...

    Price: KES :  200

  • AEC 418 Project Appraisal and Evaluation - Economic Analysis of Projects

    This is a topic about economic analysis of projects. it is an important topic in project appraisal and evaluation. It has the following sub topics (i) conversion of markets to accounting prices (ii)...

    Price: KES :  200

  • AEC 418 Project Appraisal and Evaluation - Risk Assessment of Projects

    This document is about the topic 'Risk assessment of projects'. Assessment of projects is a very important thing in project evaluation. The following are the key subtopics which are highlighted. (i)...

    Price: KES :  100

  • EPY 110: Maseno University Introduction to Educational Psychology Notes

    This is full notes for the students taking Education.Introduction to psychology comes in simple and easy to understand notes placed in point form. All the theories are described in a simple way and...

    Price: KES :  50

  • Applied Stochastic processes: Branching Process Notes

    The notes are based on discrete branching process and provides a deeper understanding of the probability distributions of each population generation and introduces the concept of probability of...

    Price: KES :  100

  • Maseno University UCI 101: Foundations of Information Technology Notes

    These are full notes for the unit of Foundation of information technology UCI 101 Maseno University. Brief overview: DEFINITION OF TERMS Information and Communication Technologies...

    Price: KES :  60

  • Entrepreneurship Notes

    Starting a small business and all about business plan. Brief Overview: Forms of business ownership Introduction: One of the first decisions facing prospective business owners is to determine...

    Price: KES :  500

  • AKS 200: Kiswahili Phonetics and Phonology Year 2 Notes

    Inaangazia mada yenye malengo ya kufunza fonetiki na fonolojia katika nyaja mbalimbali ya masomo.Kwa undani utapata usaidizi kuhusu mada hii.

    Price: KES :  200

  • BLIS 102: Cataloging 1 1st Year Notes

    This are the official Kenyatta University lecture notes for ISC and BLIS 102. Full notes covering all the unit.

    Price: KES :  35

  • BAF 1101: Financial Accounting 1 Notes - Mount Kenya University

    BAF1101: FINANCIAL ACCOUNTING I Purpose: To develop the learners understanding of the principles of book-keeping and accounts and the ability to maintain books of...

    Price: KES :  1500

  • DPHT 018 SAP 1 Notes - Safety in the Pharmacy

    These notes include the sources of danger in a pharmacy. They also include various methods to prevent or control the danger and also the safety designs of a modern pharmacy.

    Price: KES :  200

  • Financial Institutions and Sources of Finance Notes

    This notes is designed to help students pursuing business courses for economics, commerce, procurement and supply management,business management and so on at all levels. Brief...

    Price: KES :  300

  • Applied mathematics notes: Electrical and electronics engineering

    Handwritten Applied mathematics notes: Electrical and electronics engineering Document Length: 12 pages

    Price: KES :  1000

  • Bachelor of Commerce: Business Risk

    Business risk is the chance of loss in business activity due to event or occurrence which create negative adverse situation contrary to the expectation. The Nature of Business Risk 1) Risk is...

    Price: KES :  30

More Content By 0111545156


  • BAC 207: Fundamentals of Accounting II Notes on Company/Corporation

    Company/Corporation Corporation A business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock is a corporation. The...

    Price: KES :  100

  • ECT 201: General Instructional Methods Notes

    Course description: This course is designed to help future teachers aware of the integrated approaches to teach their various subjects of specialty. It will provide an integrated coverage of...

    Price: KES :  300

  • HAS 112: HIV, AIDS and STI(S) Notes

    The documents contain notes on HIV , AIDS and STIs Areas Covered -Fundamentals of HIV -Prevention of HIV and AIDS -Management of HIV and AIDS -Strategic behavior change communication...

    Price: KES :  198

View all resources  

What Our Users Say