A Study on the Role of Ratio Analysis in Strategic Financial Management: Techniques and Applications With Reference to Heritage
Year: 2025
Type: article
Abstract: In order to value stocks, this article lays forth a method for analysing financial statements. We add a growth analysis to our standard profitability study and make some extensions to it. The prevailing viewpoint is that of predicting equity returns. Therefore, the examination of financial statements is first presented as a pro forma study of the future, with predicted ratios seen as the foundation of predicted returns. Therefore, looking at the financial statements as they are right now is all about finding the ratios that will generate equity payoffs in the future. Hierarchical analysis of financial statements reveals more nuanced information about higher-level metrics from those lower in the ordering. We record the usual values of the ratios for the eras, together with their cross-sectional fluctuation and correlation, to provide historical benchmarks for predicting. Additionally, with an eye towards prediction, we detail the time series behaviour of several ratios and provide evidence of their usual "long-run, steady-state" values. Ratio analysis and data envelopment analysis are compared in this work. It is shown that ratio analysis entails many projections of a single multidimensional space onto various subspaces. This causes a major skew in the evaluation of individual units' performance. Computational investigations using bank account data confirm our theoretical conclusions. In order to get a better picture of the company's health and performance, investors and executives utilise financial statements as a management tool. A company's liquidity, long-term solvency, financial viability, and profitability may be ascertained via the examination and analysis of financial accounts. Using ratio analysis, one may see whether the firm has been becoming better or worse over the previous several years. In addition, it is a great tool for comparing various elements of all the companies. It helps customers in determining which firms provide the least risk or where they should put their money to get the most return. The mining industry requires a large initial investment due to its capital intensive nature. Investors should thoroughly research the company's financial health and reliability before putting their money into such ventures. There has been surprisingly little research on the study and interpretation of Indian mining firms' financial accounts. In this research, we looked at five different mining businesses' financial statements, some of which dealt with coal and others of which didn't.
Author: IJASEM
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6931062571
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