Analysis And Use Of Financial Ratios - 903 Words

Ratios are measurements. The reason ratios are used, as opposed to absolute values, is a mathematical one, and is basically in order to facilitate comparison by adjusting for size (Barnes, 1987). Similarly, knowledge of the behavior of turnover ratios might be useful in assessing the effects of changes in any of the underlying economic characteristics (Gupta and Hgefner, 1972). Article One In article â€Å"The Analysis and Use of Financial Ratios: A Review Article† by Barnes (1987), financial ratios are discussed. The discussion on financial ration is about the purpose of financial ratios. The purpose of financial ratios is to aid management s efficiency of planning and implementing actions based on prediction outcomes through coefficients and deviations. The financial ratios are used in design projects because the advantages outweigh the disadvantages. Barnes (1987) suggest using debt and performance ratios. Debt ratios indicated the percentage of a the assets verse debt. The formula is total debt divided total assets. Performance ratios indicated different aspects of cash flow. There are many different performance ratios. The advantages of debt and performance ratios are evaluating the worth or success of functions within a firm and identifying needs of a firm to meet the objectives, targets, goals, and scope before and after the planning process at different life cycles. The worth or success with a firm allows investors and managers to develop new opportunitiesShow MoreRelatedRatio and Financial Ratio Analyisis1712 Words   |  7 PagesRatio and Financial Statements Analysis Kimberly Y. Gruber University of Maryland University College Dr. Sunando Sengupta 07/25/2013 Turnitin Score: 23% Executive Summary The purpose of this paper is to examine ratio and financial statement analysis. Such analysis is a useful tool for managers and stakeholders to evaluate a company’s financial health in order to identify opportunities for growth and areas of weakness so as to institute corrective measures.   Financial statements are usedRead MoreFinancial Ratio Analysis in a Company859 Words   |  3 Pagesto Olowe (1997), Financial Ratio Analysis is the relationship between the performance of a company and the monetary data in the financial statements to assist the economic conditions. Financial ratio was defined by Robert (1994) as two financial variables being used that have been taken from either the income statement or from the balance sheet. Ratio analysis is a tool that is brought in by individuals to perform an evaluative analysis of information in the company’s financial statements. It isRead MoreRatio Analysis : Analysis And Interpretation Of Financial Statements1490 Words   |  6 PagesRatio analysis is used to describe the important relationship that lies between figures based on line items in financial statements like the balance sheet, profit and loss account, and a budgetary control organization. Ratio analysis is a technique of analysis and interpretation of financial statements. It helps in evaluating the financial position and performance of the firm, ratio analysis also allows firms to compare their operational or financial performance to another firm or the industry standardRead MoreUsefulness And Limitations Of Financial Ratios1510 Words   |  7 Pageslimitations of financial ratios in evaluating the performance and management of companies Ratio analysis is used to describe the important relationship that lies between figures based on line items in financial statements like the balance sheet, profit and loss account, and a budgetary control organization. Ratio analysis is a technique of analysis and interpretation of financial statements. It helps in evaluating the financial position and performance of the firm, ratio analysis also allows firmsRead MoreFinancial Performance Analysis1727 Words   |  7 PagesLITERATURE Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a tool in decision-making processes related to stocks, bonds, and other financial instruments. Analysis of financial statements provides valuable information for managerial decision. Financial analysis is commonly called analysis and interpretation offinancial statement. Analysis of financial statements means establishingRead MoreThe Financial Status Of A Company1548 Words   |  7 PagesThe financial status of a company is a high priority for internal personal such as managers and external personal such as stockholders. The reason being that by developing financial statements and ratio analysis it allows all users to see the current and future status of a company’s financial state. Financial statements are beneficial, but have certain limitations that may cause issues, if unknown, when the company or individuals use them. This paper will discuss the benefits of ratio analysis andRead MoreI)Explain Standardized Financial Statements Including Why932 Words   |  4 Pagesi) Explain standardized financial statements including why financial statements are stand ardized. i) Standardized financial statements are standardized because it is difficult to make comparisons between two companies. The company’s size and currency difference could be significantly different and it makes it harder to compare. One way to standardize a financial statement is to use percentages instead of total dollar amounts. This type of change would result in a common-size statement. ThereforeRead MoreEffectiveness And Limitations Of Ratio Analysis1540 Words   |  7 PagesRatio analysis is the fundamental indicator of company’s performances for so many years; it is also can be seen as the very first step to measure a company’s performance along with its financial position. Moreover, ratio analysis has been researched and developed for many years, Bliss had presented the first coherent system of ratios, and he also stated that ratios are â€Å"indicator of the status of fundamental relationship within the business† Horrigan (1968). However there ar e some arguments on whetherRead MoreImportance of Financial Statements1034 Words   |  5 PagesFinancial statements, also known as financial reports, record the financial activities of a business in short and long term. The four financial statements are: balance sheet, income statement, statement of retained earnings, and statement of cash flows. A balance sheet reports the assets, liabilities, and net equity on a company. An income statement reports income, expenses, and profits on a company. A statement of retained earnings shows a company s changed retained earnings. The statementRead MoreTools Used in Financial Management625 Words   |  3 PagesThere are wide range of tools used in such as, cost of capital, financial leverage, capital budgeting appraisal methods, ABC analysis, ratio analysis and cash flow statements. (a) Cost of capital Cost of capital is an important element in investment decision or basically in business. It is used to measure the value of investment proposal provided by investment concern. It is used as discount rate in defining the present value of future cash flow which is associated with capital projects. Cost