Commerce Exam > Commerce Questions > Accounting Ratio isa)It is arithmetical relat...
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Accounting Ratio is
- a)It is arithmetical relationship between two accounting variables
- b)tool used by individuals to conduct a quantitative analysis of information
- c)Based on credit transactions only
- d)Based on cash transactions only
Correct answer is option 'A'. Can you explain this answer?
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Accounting Ratio isa)It is arithmetical relationship between two accou...
Accounting Ratio is also called financial ratios provide a way of expressing the relationship between one accounting data point and another which is intended to provide a useful comparison.
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Accounting Ratio isa)It is arithmetical relationship between two accou...
Accounting Ratio:
Accounting ratio refers to the mathematical relationship between two accounting variables. It is a tool used by individuals to conduct a quantitative analysis of financial information. Accounting ratios are calculated by dividing one accounting variable by another to gain insights into the financial performance and position of a company.
Arithmetical Relationship:
Accounting ratios are based on an arithmetical relationship between two accounting variables. These variables can include items from the profit and loss statement, balance sheet, or cash flow statement. By comparing these variables, ratios provide valuable information about a company's financial health and performance.
Quantitative Analysis:
Accounting ratios are a key tool for conducting quantitative analysis. They allow individuals to analyze financial data and gain insights into various aspects of a company's operations. Ratios can help assess profitability, liquidity, solvency, and efficiency. By comparing ratios over time or against industry benchmarks, individuals can identify trends and make informed decisions.
Credit and Cash Transactions:
Accounting ratios are not limited to credit transactions or cash transactions only. They can be calculated using various financial data, regardless of the transaction type. For example, ratios such as return on assets, return on equity, and gross profit margin can be calculated using both credit and cash transactions.
Conclusion:
In conclusion, accounting ratios are arithmetical relationships between two accounting variables. They serve as a tool for conducting quantitative analysis and provide insights into a company's financial performance. Accounting ratios are not limited to credit or cash transactions and can be calculated using various financial data.
Accounting ratio refers to the mathematical relationship between two accounting variables. It is a tool used by individuals to conduct a quantitative analysis of financial information. Accounting ratios are calculated by dividing one accounting variable by another to gain insights into the financial performance and position of a company.
Arithmetical Relationship:
Accounting ratios are based on an arithmetical relationship between two accounting variables. These variables can include items from the profit and loss statement, balance sheet, or cash flow statement. By comparing these variables, ratios provide valuable information about a company's financial health and performance.
Quantitative Analysis:
Accounting ratios are a key tool for conducting quantitative analysis. They allow individuals to analyze financial data and gain insights into various aspects of a company's operations. Ratios can help assess profitability, liquidity, solvency, and efficiency. By comparing ratios over time or against industry benchmarks, individuals can identify trends and make informed decisions.
Credit and Cash Transactions:
Accounting ratios are not limited to credit transactions or cash transactions only. They can be calculated using various financial data, regardless of the transaction type. For example, ratios such as return on assets, return on equity, and gross profit margin can be calculated using both credit and cash transactions.
Conclusion:
In conclusion, accounting ratios are arithmetical relationships between two accounting variables. They serve as a tool for conducting quantitative analysis and provide insights into a company's financial performance. Accounting ratios are not limited to credit or cash transactions and can be calculated using various financial data.
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Accounting Ratio isa)It is arithmetical relationship between two accounting variablesb)tool used by individuals to conduct a quantitative analysis of informationc)Based on credit transactions onlyd)Based on cash transactions onlyCorrect answer is option 'A'. Can you explain this answer?
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