Ratio Analysis is the Most Common Yet Significant Financial Analysis Function : Whiz Consulting

While interpreting and understanding the financial data, ratio analysis is the most common and primary tool. The staff at Whiz Consulting shares how they use this method for their widespread clients.  End Quote

Dallas, TX (1888PressRelease) February 22, 2022 - Whiz Consulting is a well-known name in the virtual accounting and bookkeeping industry. In a recent interview, their senior accountant shared the significance of ratio analysis for a company's financial statements. Every company has to prepare a balance sheet, income statement, and cash flow statement yearly to satisfy its users' queries and give them insight into its economic performance, background, and current standing. These financial statements undergo various analyses to form meaning for the users and managers. Ratio analysis is among the primaries among the different analytical tools and techniques available. "No matter which company or industry we deal in, we have to conduct ratio analysis to understand and form relations of the different elements and assist the company in decision-making," said the accountant at Whiz Consulting. 

Ratio analysis involves taking two elements in the financial statements and forming a relationship. There are industry benchmarks or standards that facilitate comparison. For example, the current ratio takes current assets and liabilities and shows the company's ability to cover its short-term debt obligations (in other words, it reflects the liquidity position). For example- a 2:1 current ratio is desirable. The ratio or percentage may differ according to the industry, country, etc. There are five types of ratios:

Liquidity ratios show the company's ability to pay current obligations (short-term). These include the current ratio, quick ratio (current- inventory and prepaid expenses), and acid-test ratio. 

Solvency ratio analysis shows the company's ability to pay long-term obligations. These include debt to equity and interest coverage ratios. 

Profitability ratios indicate the extent of profit earned by the company on sales. In other words, it is the rate of return on sales and includes gross profit, net profit, operating profit, and interest coverage ratio. 

Turnover or efficiency ratios reflect the company's speed in converting assets into money. These include fixed asset turnover ratio, inventory turnover ratio, and receivables turnover ratio. 

Earning or market ratios are helpful for investors as it indicates the performance of a company's stock in the market. It includes price earning, dividend yield, and earnings per share. 

With the help of ratio analysis, firms can understand complex financial numbers simplified. They can use the ratios to identify a trend or positive/ negative movement in its operations. It also facilitates inter-company comparison to see where one stands. " Our company offers ratio analysis services to every client. It allows them to quickly understand the complex financial data without hassle or time wasted. We use modern accounting software to generate the report, thus saving time and enabling real-time access into the financial position," said the senior executive at Whiz Consulting. 

It is not easy to understand a financial report, especially for a non-specialist who doesn't know various terms. Since they incorporate numbers and jargon, a ratio analysis helps make sense of the data, understand the relationship of different components, and indicate its growth, performance, and future potential. With effective services from an accountant or a well-established firm, companies can benefit from the expertise and access to the latest resources and understand the company's financial position in a better light. Knowing the business's financial health can allow its users to make better and more informed decisions. "Our USP lies in providing personalized and custom ratio analysis services to our customers, so they can benefit from an in-depth understanding and make decisions accordingly," said the senior executive at Whiz Consulting. 

About Whiz Consulting:
Whiz Consulting is a premium name in the accounting and bookkeeping industry, offering its services virtually to remote users. It serves small, medium, and large businesses of diverse industries, including real estate, media, healthcare, legal, e-commerce, etc. It employs a highly qualified, expert staff and reputed professionals to serve its clients with the best expertise and proficiency. They have an exceptional record and offer services at competitive rates. They ensure compliance with the legal regulations and use the latest accounting technology and software to conduct activities and generate reports. 

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