Ratio Analysis

Accounts make little sense to Managers and people who don’t have the technical knowledge. This has resulted in the evolvement of a new stream in Accounting known as Management Accounting. 

Ratio analysis is a part of management accounting, whereby complicated accounting information can be presented in a more simplified and presentable manner for laymen in accounting to understand and absorb the information.

A statistics has little value in isolation. The statement ‘a business earned a profit of $100m’ does not make much sense unless it is related to either its sales turnover or its assets.