Ratio analysis can be an effective and useful management tool if ratios are calculated on items that are meaningful and where practical steps can be taken to make improvements in business operations based on the information the ratios reveal.
Dynamic analysis and comparisons over time, that show trends and evolutions, can be particularly useful in tracking, monitoring and controlling those items that are key to the success of the business.
Benchmarking, comparisons with competitors, and ratio analysis that shows your position in your specific market segment can make you aware of developments and areas of opportunity that can make your business more competitive, and ultimately more profitable.