Ratio Analysis is the Most Common Yet Significant Financial Analysis Function : Whiz Consulting 

DALLAS - Feb. 21, 2022 - PRLog -- Whiz Consulting is a well-known name in the virtual accounting and bookkeeping industry. In a recent interview, their senior accountant shared the significance of ratio analysis for a company's financial statements. Every company has to prepare a balance sheet, income statement, and cash flow statement yearly to satisfy its users' queries and give them insight into its economic performance, background, and current standing. These financial statements undergo various analyses to form meaning for the users and managers. Ratio analysis is among the primaries among the different analytical tools and techniques available. "No matter which company or industry we deal in, we have to conduct ratio analysis to understand and form relations of the different elements and assist the company in decision-making," said the accountant at Whiz Consulting.

Ratio analysis involves taking two elements in the financial statements and forming a relationship. There are industry benchmarks or standards that facilitate comparison. For example, the current ratio takes current assets and liabilities and shows the company's ability to cover its short-term debt obligations (in other words, it reflects the liquidity position). For example- a 2:1 current ratio is desirable. The ratio or percentage may differ according to the industry, country, etc. There are five types of ratios:

• Liquidity ratios show the company's ability to pay current obligations (short-term). These include the current ratio, quick ratio (current- inventory and prepaid expenses), and acid-test ratio.  
• Solvency ratio analysis shows the company's ability to pay long-term obligations. These include debt to equity and interest coverage ratios.  
• Profitability ratios indicate the extent of profit earned by the company on sales. In other words, it is the rate of return on sales and includes gross profit, net profit, operating profit, and interest coverage ratio.  
• Turnover or efficiency ratios reflect the company's speed in converting assets into money. These include fixed asset turnover ratio, inventory turnover ratio, and receivables turnover ratio.  
• Earning or market ratios are helpful for investors as it indicates the performance of a company's stock in the market. It includes price earning, dividend yield, and earnings per share.
• https://www.whizconsulting.net/us/ratio-analysis-services/