Ratio analysis can provide insight into the financial position


Ratio anatomy can prepare insight into the financial collocation and execution of an being. According to Birt et al (2014) kindred anatomy generally involves three steps which includes: 1. Calculating the kindred using the expend formulae e.g. the something-due to equity kindred = Liabilities / Equity 2. Comparing the kindred to benchmarks e.g. among the toil or compared to other interior departments 3. Interpreting the kindred and seeking reasons for movements (if any) compared to earlier reporting periods. It is in points 2 and 3 where kindred anatomy solution has it's true qualitative part. Ratios only have "real meaning through similitude, not as depend over numbers" (Birt et al, 2014, p 320).

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