Question

Distinguish between ratio analysis and percentage analysis relative to the interpretation of financial statements. What is the value of these two types of analyses?

Short answer

Percentages allow for estimating changes in revenue and explaining things over time. At the same time, the ratio expresses the relationship of one number to another.

Step-by-step solution

Meaning of Financial Statements

A series of high-level reports that describe an organization's financial results, financial status, and cash flows are known as financial statements. The income statement, balance sheet, and cash flow statement are the three.

Difference between Ratio analysis and Percentage analysis and explaining their values

Percentage analysis restricts the arrangement of linked quantities to a range of rates on a given basis, whereas ratio analysis requires the calculation of a specific proportion of a numberon a given basis.

Percentage analysis promotes comparison and can be used to estimate the relative magnitude of different items. Ratio analysis focuses on the presence of a certain connectionand then measures it as a percentage point or a single ratio.