List of top five problems on financial ratios with its relevant solution. Problem # 1: The working capital of ABC Ltd. has deteriorated in recent years and now stands as under: (a) Compute the current and quick ratios. (b) A further bank loan of Rs. 50,000 against debtors is under negotiation. Assuming the loan is received, calculate the revised current [...]
The following points highlight the five major limitations of financial ratios. 1. Accounting ratios are based on accounting figures given in the financial statements. However, accounting figures are themselves subject to deficiencies, approximations, diversity in practice or even manipulation to some extent. Therefore, ratios are not very helpful in drawing reliable conclusions. 2. Accounting ratios have inherent problem of comparability. [...]
In this article we will discuss about Financial Statement Analysis:- 1. Meaning of Financial Statement Analysis 2. Objectives of Financial Statement Analysis 3. Techniques. Meaning of Financial Statement Analysis: Financial Statement Analysis is an analysis which highlights important relationships in the financial statements. Financial Statement analysis embraces the methods used in assessing and interpreting the results of past performance and [...]