Question

Identify which of the following is the primary emphasis of managers to evaluate the ratios of a company:

[0.88 marks]

• A. Return on investment
• B. Future growth of organisation
• C. Long-term solvency of the organisation
• D. Timely payment

Answer 1

The correct option is B Future growth of organisation

The management calculates ratios for taking various managerial decisions. It is always interested in the future growth of the organisation. In this regard, the management designs various policy measures and drafts future plans. It wishes to know how effectively the resources are being utilised. Consequently, it is interested in activity ratios and profitability ratios like net profit ratio, debtors turnover ratio, fixed assets turnover ratio, etc.