Answer to Question #264146 in Marketing for Damu Ahmed

Question

Explain the need for the financial analysis. How does the use of ratios help in financial

analysis?

Answer 1

Financial analysis is crucial because it analyzes whether the entity is profitable, liquid, stable, or solvent enough to secure a monetary investment.

Ratios help in:

1.      Financial ratios help the business to compare financial results to those of its competitors.

2.      Financial ratios measure the relationship between two or more financial statements

3.      Ratios help in measuring the profitability of the entity.