India, Dec. 25 -- Financial ratio analysis is used to convey the fiscal health and performance of an organisation to various stakeholders such as owners, customers, managers, suppliers, vendors, lenders, regulators and competitors. This is done by analysing information available in a firm's financial statements.
This system originally started in banks in the US in the 19th Century to gauge the loan repaying capacity of organisations. It was later extended to investors' decision-making for business purposes using financial ratios. Later, with corporate organisations emerging, the relevance of ratio analysis was understood even more. After the second World War, with the advent of science and technology and increased market competitiveness, n...