... accounting ratios Accounting ratios analysis is the most widely used method to evaluate the financial performance of a company. There are three types of ratio analysis: a) Time series analysis (or "intertemporal comparison") is the comparison of the figures for one year with those of the preceding years within the firm. b) Cross-sectional analysis (or "interfirm comparison") "involves making a comparison with other companies in the same industry " (Walton P. P.154) or an industry average for the same year. c) Absolute benchmark-balance sheet ratios & income statement ratios 1.2 Advantages for using accounting ratios analysis Accounting ratio is emphasizing the efficiency instead of absolute number comparison. "The most powerful feature of ratios is to avoid the size difference problems between companies and the problems when we only look at the figures alone." (Chin-bun Tse, P.246) It is easy to calculate by using fraction and easy to understand as well. Besides these, ...

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