Madhu

come to the knowledge of management, which helps in effective control of business.

Others users:-

These are so many other uses other ratio analysis. It is an essential part of budgetary control and standard costing. Ratios are of immense importance in the analysis and interpretation of financial statements as they bring the strength or weakness of a firm.

(B) Utility to shareholder/investors: Investors in the company will like to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in the form of dividend or interest. For first purpose, he will try to assess the value of fixed assets and the loans raised against them. The investor will feel satisfied only if the concern has sufficient amount of assets long –term solvency ratios will help him in assessing the financial position of the concern. Profitability ratios, on the other hand, will be useful to determine the profitability position. Ratio analysis will be useful to the investor in making up his mind whether present financial position of the concern warrants further investment or not.

(C ) Utility to creditors:

The creditors or suppliers extend short-term credit to the concern. They are interested to know whether financial positions of the concern enable their payments at a specified time or not. The concern pays short term creditors out of its current assts. If the current assets are sufficient to meet the current liabilities then the creditors will not hesitate in extending credit facilities. Current and acid test ratios will give an idea about current financial position of the concern.

(D) Utility to employees

The employees are also interested in the financial position of the concern especially profitability. Their wages increase and amount of fringe benefits are related to the volume of...