Ratio Analysis 'Evaluating Past Performances And Predicting Future'

Ratio analysis is more than just selecting and comparing different numbers from the balance sheet, income statement, and cash flow statement. "Marginal ratio analysis is widely used as a means of evaluating past performance and predicting the success or failure of future business organizations. This ratio reflects the facts of past years, industry, other companies, In this ratio, we examine the relationship between the values ​​and associate them to grasp the past company's performance and future performance.

Performance analysis - Performance analysis identifies and analyzes the gap between planned performance and expected performance. The organization must critically assess the organization's past performance, current situation, and anticipated future conditions. This critical assessment identifies the extent of the gap between the actual reality and the long-term desire of the organization. If the current trend continues, the organization will try to estimate its potential future situation.

Although financial statement analysis is an excellent tool to measure the company's past performance and predict future performance, it may affect the interpretation of the accounts, so before the blind use of financial analysis There are some problems to be aware of. Some of these problems are as follows. For analysts, it seems to be able to compare financial statement analysis among different companies based on the ratio being used, so it is a big problem, but in fact it may not be able to draw accurate images. You can compare the financial ratios of two different companies and see how they match each other, but each company can aggregate all the different information and create their financial statements. This could lead to false conclusions about companies related to other companies in the industry.

When investors and analysts talk about fundamentals and quantitative analysis, they usually refer to ratio analysis. Ratio analysis uses current and historical financial statement data to evaluate the company's performance and financial condition. Using the data obtained from the report, compare the company's performance over time, judge whether the company is improving or deteriorating, and compare the company's financial condition with the industry average. Other companies compare to see how their company prepares funds