In today s worldwide competitive environment companies are competing in terms of product quality delivery reliability
In a fiercely competitive business world, ratio analysis is now not sufficient alone in indicating a company’s position; a fully painted and finished picture of a business’s current and future performance needs to be available to distinguish them from their competition. ... ) Their heightened popularity is due to a decrease in the faith of traditional financial measures, which at one period were described as "the most important and valuable means of summarising and evaluating a companies performance." (Fox 2001) The validity of the continuing emphasis by companies and analysts on traditional financial ratio analysis is being clouded by the limitations that they hold. ... "Ratio’s viewed in isolation are meaningless, there should always be some sort of comparison, either with another similar company, previous year, industry average or budgeted figures" (Hosking 2003.) However with reference to the above declaration, financial statements are now being scrutinised for their quality and accuracy of data, ratio’s will inherit the limitations of the financial statements on which they are based, distorting or changing figures completely, this alone questions their validity. ... Its introduction has been attributed in situations to hide poor management decisions and to satisfy the demands of major investors concerning levels of return "Chief Executive Officer’s now feel that it is not only ok, but actually their duty" (Warren Buffet 2001).