A STUDY ON

RATIO ANALYSIS
RATIO ANALYSIS:
 Ratio analysis refers to the analysis of various pieces of financial information in
the financial statements of a business. They are mainly used determine various
aspects of a business, such as its profitability, liquidity, and solvency.
TYPES OF RATIO ANALYSIS:
SIGNIFICANCE OF STUDY :
Ratio analysis is one of the techniques in financial statement analysis. It helps to
determining and interpreting relationship among various components that are expressed
in monetary terms. Based on financial statements like Profit and Loss account, Balance
Sheet, Cash flow statement, Funds flow statement etc.,
Helpful in Financial Analysis
Useful for locating weak areas
For future Forecasting
Inter-firm Comparison
Assessing Operating Efficiency
Calculating Overall profitability
 Liquidity position
LIMITATIONS :
Inadequate standards.
Time is major constraint.
With out absolute data, ratios could be deceptive.
Restrictive usage of one data.
A misleading ratio is produced by erroneous accounting data.
Ratio by themselves is insufficient for valid conclusions.
The analyst’s prejudice and personal attitude.
 If any firm use various accounting policies, comparison is impossible.
CONCLUSION :
 The ratio analysis project is more than just a project’s job in the service business. However, a
basic understanding of how to assess the company’s financial performance. According to this
project me and my team members learned that Ratio analysis is a competent tool to analyze
the financial position of the company .