CHAPTER 2

REVIEW OF RELATED LITERATURE

A common use of accounting information is measuring the performance of various business operations. While
financial statements are the classic accounting information tool used to assess business operations, business
owners may conduct a more thorough analysis of this information when reviewing business operations. Financial
ratios use the accounting information reported on financial statements and break it down into leading indicators.
These indicators can be compared to other companies in the business environment or an industry standard. This
helps business owners understand how well their companies operate compared to other established businesses.
(Vitez, n.d.)