A ratio shows the relationship between numbers. It is defined as the comparison of two quantities defining the quantity of the first number in comparison to the second number. It can be written as a fraction or with the use of colon. A proportion, on the other hand, is a statement of two rational numbers that are equal.
Ratios and proportions are mathematical concepts that are used widely on our everyday lives even without use really taking notice. Take for example the relationship between how many gallons of fuel purchased and the amount we have to pay, the distance our vehicle can run over a certain measure or time, and the price per ounce of items we purchase in the grocery. These all represents ratios, and the list can go on as ratios and proportions can be applied on just about anything.
Ratio and Proportion in Business
A successful business requires thorough planning and effective financial management. Ratio analysis is a tool that businesses use in order to fully comprehend their financial statements, understand and identify trends affecting the business and reviewing the overall financial situation of the company. Using ratio analysis, business owners are more equipped to make sound and valuable information. Among the benefits of ratio analysis to business owners, investors and creditors are the following:
- Financial Statement Analysis
- Reviewing Trends and Preparing Forecasts
- Comparing Company’s Performance with Industry Standards or Competitors to help you identify the strengths and weaknesses of your Company
- Evaluating employee turnover
- Assessing Client or Customer Satisfaction
Understanding Ratio and Proportion
Although this subject has been taught to us since elementary years, a lot of us are still unsure about this topic. To help you refresh your memory, I’ve shared a short YouTube video on Ratio and Proportion.
Cebu Accountant 