MEANING OF RATIO ANALYSIS

termed
of 'accounting ratios is
as

An Analysis of tinancial statements with the help

Ratio Analysis.

a business."
Myers
various financial factors in
"Ratio analysts Is a stiuay of relationship among
items
O between the
Ratio analysis
Is a process of determining and interpreting relationships
inancla and
of the performance
financial statements to provide meaningful understanding
a

or enterprISe. Ihus, it
an technique of analysing the financial
is a
statements
D
position
computing ratios.

08JECTIVESOF RATIO ANALYSIS

in the inancial
are interested
s e r v e s the purpose of various users who
Ratio analysis statements.
It summarises and systematises the figures in the financial
statements. simplihes,
The objectives of ratio analysis are:

the accounting intormation.

1. To simplity
to meet its
Short-term solvency (Ability of the enterprise
2. To determine liquidity, i.e., to
solvency (Ability of the enterprise
short-term financial obligations) and Long-term
its liabilities) of the business.
long-term
pay
of the business.
3. To assess the operating efficiency
the profitability of the business.
To analyse
1.e., inter-firm and
intra-firm comparisons.
5. To help in comparative analysis,

ADVANTAGES OF RATIO ANALYSIS

are as follows:
The advantages of ratio analysis
Financial Statements
1. Useful Tool for Analysis of
the financial position of an enterprise.
ratios are useful for understanding
Accounting
Sheet and Statement of Profit and
Bankers, in vestors, creditors, etc., all analyse Balance

LOss using ratios.

2. Simplifies Accounting Data

summarises and systematises accounting data and making it
Accounting ratio simplifies,
lies in communicating precisely the interrelationships
understandable. Its main contribution
finaDcial statements. In the words of Biramn and
which exist between various elements of
summarise briefly the results of detailed and
Dribin, "Financial Ratios are useful because they
complicated computation."
3Useful in Assessing Operating Efficiency of Business
the
of an
the financial health and performance
counting ratios are useful for assessing
cherprise. It is assessed by evaluating liquidity, solvency,
profitability, etc.
 4. Useful for Forecasting
Accounting ratios are helpful in business planning
and torecasting. The trend ofras
ratiosi
analysed and used as a guide for future planning.
5. Useful in Locating the Weak Areas
Accounting ratios assist in locating the weak areas of the business even though the
e ooveral
performance may be good. The management can then pay attention to the weaknec
and take remedial actions.
aknesses
6. Useful in Inter-firm and Intra-firm Comparison
A firm may compare its performance with that of other firms or with the
industry standard
in general. The comparison is called Inter-firm
Comparison
or Cross-sectional Analvsis
the performance of different units belonging to the same firm is to be compared, it is calle
Intra-firm Comparison or Time-series Analysis. Accounting ratios make the
comparison simple
 WIKIPEDIA a

Dr. Reddy's Laboratories

SIA
"RDY" redirects here. For the radar system, see Radar
Doppler Multitarget.

Dr. Reddy's Laboratories is an Indian multinational

pharmaceutical company located in Hyderabad,
Telangana, India. The company was founded by
Anji Reddy, who previously worked in the mentor
institute Indian Drugs and Pharmaceuticals
Limited 2 Dr. Reddy's manufactures and markets
a wide range of pharmaceuticals in India and
Overseas. The company has over 190 medications,
60 active pharmaceutical ingredients (APls) for
drug manufacture, diagnostic kits, critical care,
and biotechnology products.

Dr. Reddy's Laboratories Ltd

Dr.Reddy's
Type Public

Traded as NSE: DRREDDY

 2007, Dr. Reddy's had seven FDA plants
By
active pharmaceutical ingredients in
producing
India and seven FDA-inspected and ISO 9001
(quality) and ISO 14001 (environmental
management) certified plants making patient-
ready medications five of them in India and two
in the UK.4
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