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When are computed ratios useful? |
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Answer» Individual ratio does not indicate any type of favourable or unfavourable situation. For making analysis of financial statements more useful and meaningful comparison of ratio analysis is included in it. Individual ratio present only result but when computed ratio copmpared with any standards or with certified ratio then it is useful, i.e. current ratio of net profit is 25%, which gives only result, but in last year it was 20% and in current year it is 25% then we can compare it and get conclusion from it. |
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