accounting ratio

Current Ratio - meaning and formula.

Current asset turnover ratio – meaning and formula

The current assets turnover ratio ascertains the efficiency with which current assets are used in a business. This ratio is strongly associated with the efficient utilization of cash, receivables, and inventory. A higher value of this ratio indicates greater circulation of current assets while a low ratio indicates a stagnation of the flow of current assets.

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6 limitations of using accounting ratios in appraising financial performance.

Accounting ratio are used to measure the efficiency and profitability of the company based on its financial reports. They provide a way of expressing relationship between one accounting data point to another, and are the basis of ratio analysis.

The following are limitation of accounting ratios in appraising financial performance:

  • Inconsistent definition of ratios
  • Financial
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