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Why do managers use ratio analysis? Group of answer choices To determine the profitability of the...

Why do managers use ratio analysis?

Group of answer choices

To determine the profitability of the organization in the future

To prepare for the independent auditor's financial review of the reporting period

To historically analyze the financial performance of the organization

To predict the future and plan strategies that will influence the future

To price individual line items that make up the invoice or bill

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Answer #1

Option (c) is correct

Managers use ratio analysis to historically analyze the financial performance of the organization. Ratios are the numerical relationships among / between the items presented in the financial statements. Ratios are based on the historical data i.e data that is already prepared or presented in the financial statements. With the help of ratios, we can find out the financial performance of the organization. Financial performance can be measured in various ratio types like profitability ratios, liquidity ratios, activity ratios etc.

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