Merits and demerits of ratio analysis

In other words by minimizing the sum of TDC and TCC we can acquire the optimum pollution and the social benefit will be high. Citizens may vote in favor of a party under the influence of the majority.

In the figure the minimum point of TC curve is not the intersecting of total damage curve and total control curve. Assessment of Liquidity Liquidity ratios are a class of financial metrics that help determine the ability of a company to meet its immediate short-term debt obligations.

Ratios can be calculated easy with the aid of preparations which cut down the clip for bookkeepers. Seasonal Factors Affect Financial Data: Brigham; "Financial Accounting"; Kermit D.

Advantages and Disadvantages of Ratio Analysis

Further reduction in pollution will cost more than its worth, when the pollution level exceeds A, extra cost to society of additional pollution is greater than the cost of preventing it. For example, a high current ratio may not necessarily mean sound liquid position when current assets include a large inventory consisting of mostly obsolete items.

The total benefit increases at a decreasing rate. Pollution costs are mainly opportunity costs or real costs. Budget is an estimate of future activities on the basis of past experience.


Ratio analysis is also used to assess the long-term debt-paying capacity of a firm. This is because of alterations in fiscal patterns and accounting attacks. Whats are merits and demerits of democracy?

The cost of allowing pollution to increase from A to B is much greater than the cost of preventing it. This can be seen in the diagram Fig.

Natural movers are people those who move due to other factors, may be the job, education etc. Liquidity ratios indicate the ability of the firm to pay and help in credit analysis by banks, creditors and other suppliers of short-term loans.

Of the management of the company changes, it may have ultimately adverse effects on the future profitability of the company but this cannot be judged by having a glance at the financial statements of the company.

Advantages and Disadvantages of Ratio Analysis

Ratios are composite of many figures: Ratio analysis shows the strength and weakness of a firm in this respect. Limitations of Financial Statements:Ratio analysis allows for a basic analysis and summary of a company's financial strengths and a basic understanding of a firm's financial profile.

Advantages & Disadvantages of Cost Benefit Analysis

Financial ratio analysis helps investors understand a firm. Learn about the DuPont analysis financial ratio, and understand some of its primary advantages and disadvantages.

Advantages and Limitations of Ratio Analysis

Some key demerits of financial ratio analysis are: Different companies operate in different industries each having different environmental conditions such as regulation, market structure, etc.

Such factors are so significant that a comparison of two companies from different industries might be misleading. More Essay Examples on.

With the aid of accounting ratios, the fiscal information can be accessible in a farther apprehensible signifier - Advantages and disadvantages of ratio analysis Essay introduction.

Cardinal information can be obtained by utilizing ratio analysis. Merits And Demerits Of Ratio Analysis. Ratio Analysis Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a. Advantages and Disadvantages of Ratio Analysis.

Advantages: Ratios help compare current performance with previous records. Ratios help compare a firm’s performance with similar competitors.

Merits and demerits of ratio analysis
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