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Question
State any three advantages of ratio analysis.
Short Note
Solution
Following are the advantage of ratio analysis:
- Measuring operational efficiency: Ratio analysis helps to know the operational efficiency of a business by finding the relationship between operating cost and revenues and also by comparison of present ratios with those of the past ratios.
- Intra firm comparison: Comparison of the efficiency of different divisions of an organization is possible by comparing the relevant ratios.
- Inter-firm comparison: Ratio analysis helps the firm to compare its performance with other firms.
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Advantages of Ratio Analysis
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