Value and Limitations of Ratios (AQA A-Level Business): Flashcards
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Practise the cards
10 cards from this deck
Financial ratio analysis
Financial ratio analysis
Tool examining company's financial performance
Ratios tracking performance benefit
Ratios tracking performance benefit
Identify trends revealing financial strengths & weaknesses
Variable factors in ratio analysis
Variable factors in ratio analysis
Inflation, accounting changes, market environment
Low payables days ratio decision
Low payables days ratio decision
Negotiate longer credit period to improve cash flow
High-geared business
High-geared business
Business with high levels of debt
Why ratios enable meaningful comparisons
Why ratios enable meaningful comparisons
Standardise data to compare different-sized businesses
Critical limitation of ratios
Critical limitation of ratios
Don't account for non-numerical factors
Internal strengths not in ratios
Internal strengths not in ratios
Staff quality, management expertise, motivation, culture
External factors not in ratios
External factors not in ratios
Economic/market environment, competition
Time limitation of ratios
Time limitation of ratios
Show past & present only, not future