What do understand by accounting ratio? explain the principles of ratio selection.
Saturday, March 18, 2023
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Question: What do understand by accounting ratio? explain the principles of ratio selection.
Accounting ratios are mathematical expressions that show the relationship between different accounting items. They are used to assess the financial health and performance of a business. The principles of ratio selection involve selecting relevant ratios that reflect the objectives of the analysis, using consistent data from financial statements, comparing ratios with industry benchmarks or previous periods, and considering the limitations and interpretation of ratios. The selection of appropriate ratios can help in identifying areas of strength and weakness, facilitating decision-making and financial planning.
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