Some Ratios Are More Useful for Management,whereas Others Are Better

question 137

Essay

Some ratios are more useful for management,whereas others are better suited to the needs of outsiders,such as stockholders and bankers.What is an example of a ratio that is primarily suited to management use and why? What ratio is more suited to use by outsiders and why?

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Definitions:

11%

11% typically refers to an interest or annual rate, indicating that 11 percent of the principal amount will be paid in interest over a year.

Nominal Rate

The promoted or declared rate of interest on a loan or investment, excluding the impacts of compounding and inflation.

Compounded Monthly

Interest calculation method involving the addition of interest to the principal sum of a loan or deposit, repeated every month.

Compounded Semi-Annually

Interest calculation method where interest is added to the principal sum twice a year, leading to interest earnings on interest.