14. CONCLUSION
The efficiency and effectiveness in the process of working capital management can be judged with the assistance of certain accounting ratios as mentioned earlier. Ratios such as Current Ratio, Quick Ratio, Working Capital Ratio, Inventory Turnover Ratio, Debtors Turnover Ratio, Current Assets Turnover Ratio and Average Collection Period Calculation etc. are the most important and can widely be used in order to feel financial and solvency pulse of an organization. All of these ratios help diagnosis the soundness of pattern of working capital management of a corporate. But certain collection is required to observe as cause-effect relationship that is to be examined thoroughly while using ratios for any pre-determined purpose. Limitations of ratio analysis arise due to difficulties in making comparison.
It is to keep in mind that conclusion drawn from the Ratios can be no better than the yardstick or standard against which they are compared. Moreover, inflationary influence on ratio analysis should be taken into account while it is adopted for ascertaining symptom of the disease or soundness of financial health of a business, a Balance Sheet may not be able to reflect the average financial position as it is prepared on a particular even date. Generally, it does not take into view short-term fluctuations in current assets that may occur within two Balance Sheet dates.
