Ratio analysis is one number compared to other numbers as a relationship. According to Jonathan Golin, argues that the ratio is a number depicted in a pattern compared to other patterns and expressed as a percentage. While finance is something related to accounting such as financial management and financial reports . Financial ratio analysis is used by two main users, namely investors and management . Investors use ratio analysis to see whether a company is a good investment or not.
Financial Ratio Analysis or Financial Ratio is an analysis tool used by companies to assess financial performance based on comparative data of each item contained in the financial statements such as Balance Sheet, Loss / Profit , and Cash Flow in a certain period.
Ratio Analysis Function
- Liquidity Ratio: Liquidity ratio is a ratio that measures the short-term liquidity capability of a company by looking at the company’s current assets relative to its current debt.
- Inventory Turnover Ratio: Inventory turnover ratio measures the activity or liquidity of a company as seen from the availability of goods. This ratio shows the efficiency in which a company uses all of its assets to generate sales.
- Activity Ratio: Activity ratio shows the level of effectiveness of the use of company assets or wealth to you.
- Profitability and Profitability Ratios: These are ratios that indicate the level of return or acquisition over sales or assets.
- Investment Ratio: Investment ratio is a ratio that measures the ability of companies to provide returns or rewards to funders, especially investors who are in the capital market within a certain period.
The purpose of the Ratio Analysis in a company:
- As a barometer for forecasting or projecting financial position in the future.
- Reviewing the company’s current condition, problems in management, operations and finance.
- Measuring tool for efficiency in all departments of the company
