The importance of ratio analysis is it used as a tool to assists in analysing and evaluate business financial performance. For example, ratio analysis can be used to examine the efficiency of the company. It is able to assess the ability of the company to utilize their assets, liabilities and earning profits. From there, it able to help plan and forecast company’s future financial management.
As for the limitations of ratio analysis, it does not apply to all companies as it is consists of different industries. The same current ratio of Company A might not suitable to compare it to Company B that comes from a different industry as each two different industries has different standards they refers to.