In this article we will discuss about the Predictability of Insolvency on the basis of Ratios. Edward 1. Altman of U.S.A. has developed a model on the basis of which insolvency of a firm can be predicted— this has been developed on the basis of empirical research conducted by him. In Altman's view, the Z' value of the firm under [...]
Performance or activity ratios judge how well the facilities at the disposal of the concern are being used. The ratios are usually calculated on the basis of cost of sales. The ratios are also known as turnover ratios as they express the rapidity with which a unit of capital invested in fixed assets, stock, etc. produces sales. The following are [...]
Accounting Ratios: Importance and Limitations! Importance of Accounting Ratios: The importance of accounting ratios, that is, relationships worked out among various accounting data which are mutually interdependent and which influence each other in a significant manner, arises from the fact that often absolute figures standing alone convey no meaning. They become significant only when considered along with other figures. A [...]