How to prepare a ratio analysis report
Most of the financial courses required their students to prepare a ratio analysis report. This report is prepared with the objective of helping the students in learning ratios and applying them. This strategy is also helpful for investors in analysing the financial health of the company. There are various financial documents present in the organization that helps in collecting information about various income and expenditure that are taking place in the financial year; however, ratio analysis is a tool that helps in getting true meaning out of typical numbers.
However, ratio analysis itself is a huge area of learning so it is very important for students to know the major areas that they should include whole preparing a financial analysis report. sometimes there are time crunch faced by the student and they don’t have the time to evaluate all the ratios, so this report will also suggest them the major ratios that must be included in the report. Before that this report will also focus on analyzing the limitation of ratio analysis as students must know both positive and negative impact of the model used.
The numerical value of ratio is not enough for evaluating the financial health of the company; instead the true interpretation of the value is of higher importance. It is advisable to use the average value if available because incorrect value might lead to misrepresentation of the data and company performance.
To prepare a company report on ratio analysis, student needs to collect financial data of the company. This report should include the information about the company, literature review on the topic, the analysis part, findings, recommendations and conclusion part. If there is any word constraint in the report, then the major ratios that must be included in the report are acid test ratio, liquidity ratio, the turnover ratio, gross margin ratio. These ratios will help in understanding the operational efficiency of the company. For the ease of calculations students may use excel also, it helps in doing fast calculations. Beside writing good report the students also need to focus on adequate formatting and editing of the report, it will help in making it error free.
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