Monday, May 05, 2008

Ratio comparisons

Book Value
Management: Principles, Processes, and Practices
Anil Bhat and Arya Kumar

All-round management

Financial ratios in isolation are of no use, write Anil Bhat and Arya Kumar in ‘Management: Principles, Processes, and Practices’. The value of ratios lies in meaningful and relevant comparisons leading to interpretations that facilitate the analysis and diagnosis of a given situation, the authors elucidate.
“Ratio comparisons can be made in two ways — cross-sectional and time series. Cross-sectional analysis compares the financial ratios of different comparable firms at a given point of time. The comparison can be with the best, worst, or average in the industry.”


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