Financial Ratios as a Tool of Evaluating the Performance of Companies for Investment Decision
IMPORTANCE OF FINANCIAL RATIOS
The benefits derived from the financial ratios cannot be over emphasized. Financial ratio means a ratio of monetary magnitudes obtained from a firms financial statements that reflects some aspects of the firms performance.
- Bernstain, sees financial ratio as a tool of financial analysis that exposes the latent problem, weakness or strength of business organization. He equally said the financial ratio when properly interpreted will show area requiring further investigation and enquiry. These ratios reveal conditions and trends that cannot be identified by an inspection of the individual components of the ratio.