Advantages of Ratio Analysis

●      It is powerful tool to measure short and long-term solvency of a company.

●      It is a tool to measure profitability and managerial efficiency of a company.

●      It is an important tool to measure operating activities of a business.

●      It helps in analyzing the capital structure of a company.

●      Large quantitative data may be summarized using ratio analysis.

●      It relates past accounting performances with the current.

●      It is useful in coordinating the different functional machineries of a company.

●      It helps the management in future decision-making.

●      It helps in maintaining a reasonable balance between sales and purchase and estimating working capital requirements.

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