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Please identify 3 critical indicators that are the most important to a company when reviewing their...

Please identify 3 critical indicators that are the most important to a company when reviewing their financial indicators ratios.

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Answer #1

The 3 critical ratios for reviewing the financial performance of the company are

(1) WORKING CAPITAL RATIO:

This ratio determines the amount available with the company for its day to day expenses.

This also indicates the company ability to pay its current liabilities with its current assets.

(2)QUICK RATIO :

This ratio indicates ability of company to pay its current liabilities with the current assets excluding inventory.

It indicates immediate selling of current assets to pay current liabilities.

(3)Debt to Equity Ratio :

This helps the investors to know the proportion of debt as proportion to equity.

It helps the investors to know whether company has raised new additional debt and whether company will be able to fulfill its financial obligation after it raises more debt.

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