The financial status and operational performance of business entities can be assessed through financial analysis. Analysis of financial statements involves study of items in the financial statements and making a logical conclusion. There are various tools available for financial analysis such as common size statement, comparative statement, ratio analysis, cash flow analysis, etc. Ratio analysis is one of the important tools of financial analysis. Ratio analysis involves computation of various ratios for analysing the financial statements. It is the most important and powerful tool for measuring performance of a business enterprise.
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