Important Points for IC 89 - Management Accounting Exam
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Gross profit ratio expresses the general profitability and is expected to be reasonably good so as to cover not only administrative expenses and overheads, but also return on investment of the owners.
Operating Ratios are the ratios between operating expenses and Sales.
Activity ratios measure the effectiveness and efficacy of the employment of the resources of the business.
If various figures and data in financial statements are property analysed and interpreted in a systematic way, the financial statements can provide valuable insights into firms performance and for its future planning.
The Ratio analysis based on financial statements is also of special interests to investors, shareholders, suppliers, competitors, tax authority and regulators etc. for a variety of purposes such as assessing the firms solvency, liquidity, profitability, grown etc.
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