Meaning of Ratio Analysis
Ratio Analysis is a technique of analysing the financialstatements and refers to analysis of financialstatements by computation of ratios so as to provide ameaningful understanding of the performance andfinancial position of an enterprise.Ratios , as tools for establishing true profitability andfinancial position of a company , may be classified as
1.Liquidity Ratios2.Solvency Ratios3.Activity Ratios4.Profitability Ratios
Here we have to do Interfirm Comparison of acompany,
Aditya Birla Group
, on the basis of Profitability Position. So, in order to do Interfirmcomparison, we are comparing it with
For that first we need to understand about ProfitabiltiyRatios as to why they are calculated. The main objectof an enterprise is to earn profit. Profit as compared tothe capital employed indicates profitability of theconcern. If a concern goes on losing, its financialcondition will definitely be bad sooner or later. Thus, ameasure of profitability is the overall measure of efficiency.
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