3

Accounting Ratios for Financial Statement Analysis

LEARNING OBJECTIVES

On completion of the study of the chapter, you should be able to understand:

  • What is Accounting Ratio?
  • What is meant by Ratio Analysis?
  • Importance, uses, advantages and limitations of Ratio Analysis.
  • Structural Analysis of Financial Statements for the purpose of computation of different Ratios.
  • Classification of Ratios on the basis of their sources.
  • Computation of different Ratios from Financial Statements.
  • Uses of various Ratios to analyse liquidity, solvency, profitability, Capital Structure, activity and the overall performance of an enterprise.
  • How Ratios are applied to interpret Financial Statements of an enterprise.
  • Du Pont Analysis of Financial Statements.

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