The following points highlight the top six advantages of ratio analysis. The advantages are: 1. Useful in Financial Position Analysis 2. Useful in Simplifying Accounting Figures 3. Useful in Assessing the Operational Efficiency 4. Useful in Forecasting Purposes 5. Useful in Locating the Weak Spots of the Business 6. Useful in Comparison of Performance. Advantages of Ratio Analysis: Useful in [...]
The following points highlight the nine major limitations of ratio analysis. The limitations are: 1. False Results if Based on Incorrect Accounting Data 2. No Idea of Probable Happenings in Future 3. Variation in Accounting Methods 4. Price Level Changes 5. Only One Method of Analysis 6. No Common Standards 7. Different Meanings Assigned to the Same Term and Others. [...]
In this article we will discuss about the meaning and components of performance evaluation. Meaning of Performance Evaluation: Performance evaluation is the basis of a management control system. Periodic comparisons of the actual costs, revenues and investments with the budgeted costs, revenues and investments can help management in taking decisions about future allocations. Performance evaluation should be done in respect [...]