Classification of ratio according to significance
The ratios have also been classified according to their significance. Some ratios are more important than other and the firm may classify them as primary and secondary ratio. The British institute of management has recommended the classification of ratio according to importance for inter firm comparisons. For inter firm comparisons the ratios may be classified as primary ratio and secondary ratio. The primary ratio is one which is of the prime importance to concern thus return on capital employed is named as primary ratio. The other ratios which support and explain the primary ratios is called secondary ratio for example the relations ship of operating profit to sales or the relationship of sales to total assets of the firm.