Why Ratio analyses is used to analyse performance.
Used to compare performance with previous years and with competitors of similar size.
To Highlight Trends.
Show areas where corrective action can be taken.
Limitations of ratio analysis.
Information is immediately historical.
Findings do not take into accountexternal factors.
new products or product development are not taken into account.
Staff morale or turnover is not taken into account.
Recession.
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