Question

b) There are few ways to determine or evaluate the performance of company by using the...

b) There are few ways to determine or evaluate the performance of company by using the financial statement. Please explain on how to evaluate the following:

i. Ability to survive in long term.

ii. Wealth of the company.

iii. Ability to generate profit.

iv. Ability to pay debt. v.

Short term survival.

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Answer #1

I. Ability of the company to survive in the long run can be found out through solvency ratios and which will be including various kinds of debt equity ratio and long term loans

II.wealth of the company can be found out by surplus that the company is having in its books of accounts and the cash available to the company

III. Ability to generate profit can be seen through asset efficiency ratios which will be looking for better management of asset in order to generate profit

IV. Ability to pay debt capital will be looked by continuous profit making ratios and other profitability ratio along with fixed assets of the company

V. Short-term survival can be looked into by liquidity ratios which will be including gearing ratio and short-term leverage ratio.

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