● 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.