Financial Ratios Analysis
Ratio analysis is a diagnostic tool that helps to identify problem areas and opportunities within a company. Financial expert shall use ratios with caution, as there is considerable subjectivity involved, in their computation. More, ratios may not be strictly comparable for different firms due to a variety of factors such as different accounting practices, policies, and the level of risks accepted by the management. Furthermore, if a firm is engaged in diverse product lines, it may be difficult to identify the industry category to which the firm belongs.