FINANCIAL ACCOUNTING SSS3 SECOND TERM              

WEEK 2 &3

ACCOUNTING RATIOS AND INTERPRETATION OF FINANCIAL

Contents

• Introduction
• Uses of ratio
• Disadvantages of using ratio
• Types of ratio – explanation
• Illustration

INTRODUCTION

To interpret accounts is to try to gain insight into the information value of financial statements, this can be done through analysis, evaluation, criticism and comparison and all this is done by the use of accounting ratios. A ratio can be defined as the relationship that exists between two figures.

USES OF RATIO

1. Ratios are used in preparing industrial averages.
2. They can be used to interpret financial statements.
3. They help in comparing performances between and among related organizations.
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