What makes ratio analysis such a useful tool? What will be an ideal r

QUESTION

What makes ratio analysis such a useful tool?

What will be an ideal response?

ANSWER

Answer: Ratio analysis can be used to analyze a firm’s performance compared not only to its stated objectives but also to that of similar firms. Because of that, it gives a picture of how a firm stands against its competing firms, as a sort of ranking.
Explanation: Ratio analysis can be used to analyze a firm’s performance compared not only to its stated objectives but also to that of similar firms. Because of that, it gives a picture of how a firm stands against its competing firms, as a sort of ranking.