Question

*Essay questions* Discuss the various categories of financial ratios used in financial statement analysis. Provide at...

*Essay questions*

Discuss the various categories of financial ratios used in financial statement analysis. Provide at least two examples of each type of ratio and discuss what the particular ratio tells us about the performance of a company.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

There are mainly 4 categories of financial ratios

1. Liquidity Ratio - They Measure firms ability to meet current obligations

eg: Current Ratio = Current Assets / Current Liabilities

Quick Ratio = Current Assets - Inventory / Current Liabilities

2. Solvency Ratio - These Ratios shows the proportion of debt and equity in financing the firms assets

eg: Debt Equity Ratio = Debt / Equity

Financial Leverage = Total Asset / Total Equity

3. Activity Ratio - These reflect firms efficiency in utilising assets.

Inventory Turnover Ratio = Cost of goods sold / Average Inventory

Fixed Assets Turnover Ratio = Sales / Average Fixed Assets

4. Profitability Ratios - Overall performance and efffectiveness of the firm

Eg : Net Profit Margin = Net Profit / Sales

Return on Equity = Net Profit / Equity

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
There are three categories: liquidity, solvency, and profitability. Describe what each category tells the user about...
There are three categories: liquidity, solvency, and profitability. Describe what each category tells the user about the financial health of a company. Choose three ratios in each category and describe what the ratios tell the user about the company. How are the financial ratios used to evaluate a company. Discuss what the numbers would be compared against for analysis Calculate each ratio for your companies. What do the ratios tell you about each of your companies
Describe the three categories of ratios used in ratio analysis. When working on assessing General Motors,...
Describe the three categories of ratios used in ratio analysis. When working on assessing General Motors, which of these ratios do you think is the most important indicator of successful performance, why?
This concept usually involves the analysis of various financial ratios that may provide indicators of trends...
This concept usually involves the analysis of various financial ratios that may provide indicators of trends and the organization’s financial health. a. Managerial accounting. b. Financial analysis. c. Financial management. d. Financial accounting.
Although Financial Ratio Analysis has limitations, it is a great tool to find the problematic areas...
Although Financial Ratio Analysis has limitations, it is a great tool to find the problematic areas in the company so that managers can go back and address the problems. One of the limitations is differences in accounting standards around the world that can distort financial ratios. Select two publicly traded US companies listed on the NASDAQ stock market and calculate each company’s P/E (Price to Earnings Ratio) and MB (Market to Book Ratio). What do these ratios tell you about...
The _____________ analysis involves taking all of the absolute figures on the company’s financial statements and...
The _____________ analysis involves taking all of the absolute figures on the company’s financial statements and converting them to percentages. ratio trend common-size All of the above. Which of the following is a category in ratio analysis? market ratios profitability ratios liquidity ratios All of the above. With ___________ analysis, you choose a particular base year and set every single figure in that year’s financial statement equal to 100%. You then look at subsequent years, comparing each individual line in...
a. Detail and give examples of two (2) financial ratios often used to provide a direct...
a. Detail and give examples of two (2) financial ratios often used to provide a direct measure of a commercial bank’s credit risk exposure. Guide: 200 words, 4 marks. b. Find annual (yearly) data to calculate and graph the two ratios discussed in part (a) for the top four Australian banks over 2014-2019. Conduct trend and peer analyses based on your graphs, and comment on these banks’ credit risk management approaches. Guide: 400 words, 9 marks. You must provide two...
For each of the following financial statement ratios, identify whether the ratio provides analysis regarding a...
For each of the following financial statement ratios, identify whether the ratio provides analysis regarding a firms: Profitability Liquidity Solvency Common stockholder valuation Earnings Per Share (EPS) Quick ratio Gross profit percentage (or margin) Dividend Yield Price to Earnings ratio Accounts receivable turnover Operating cash flow to current liabilities ratio Days' sales in inventory Debt to Equity ratio Return on sales Return on assets Current ratio
TRUE/FALSE Simply calculating the various ratios tells everything you need to know about a company. You...
TRUE/FALSE Simply calculating the various ratios tells everything you need to know about a company. You would expect a produce market to have a low inventory turnover ratio. The Acid Test Ratio uses only the most liquid current assets in its calculation. The Current Ratio uses only the most liquid current assets in its calculation. The Inventory Turnover Ratio indicates the number of times Accounts Receivable are turned into cash during the period. The Return on Sales Ratio indicates how...
Financial Statement Analysis Executive Summary: Select two competing companies from the same industry (e.g., McDonalds vs....
Financial Statement Analysis Executive Summary: Select two competing companies from the same industry (e.g., McDonalds vs. Burger King; Target vs. Walmart; etc.), and calculate the following financial ratios for them based on their most recent financial statements: Return on Equity Return on Assets Financial leverage Profit Margin Ratio Assets Turnover Ratio Current Ratio Quick (Acid-Test) Ratio Debt-to-Equity Ratio Cash Flow from Operations to Total Liabilities Ratio Discuss from an investor’s point-of-view which of the two companies you would rather invest....
Standard Industry Classification codes (SIC) are used for financial statement “benchmarks” analysis. Your company’s financial results...
Standard Industry Classification codes (SIC) are used for financial statement “benchmarks” analysis. Your company’s financial results would need to be compared to others. SICs provide the format to compare a particular company’s financial data to their respective SIC-industry averages. Explain how you would use SIC codes to analyze a Company Xs Accounts Receivable Turnover of four times per year versus a SIC rate of eight times per year.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT