Question

what are the bases of comparison for ratio analysis with explanation

Answer 1

Ratio analysis is a technique by which a company's performance can be analyzed. It is mostly done on the financial statements of a company. The aim is to use the information from the financial statements and calculate ratios so that the investor is able to analyze the financial position of the company. The ratios are generally compared to a standard value and based on that the interpretation of the ratio, the investors can find out if the company is in a good financial position or not. They can then decide if they want to invest in the company or not.

The ratio may be compared to the historical data to find out if the condition of the company has improved or gone down. The ratio may also be compared to that of some selected firms and industry standards to find out about the performance of the company.