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Principles of Finance I WEEK 3: Discussion Prompt #2 - Ratio analysis enables stockholders, lenders, and...

Principles of Finance I WEEK 3: Discussion Prompt #2 - Ratio analysis enables stockholders, lenders, and the firm’s managers to evaluate the firm’s financial performance. For this discussion, choose one of these stakeholders and discuss examples of how they use ratios to make decisions regarding the organization.

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Answer #1

Ratio analysis is the analysis of companies financial data which is used for decision making about the company . Every company has stakeholders each stakeholders depends on the company in a particular area for example investors on return on equity and customer about our products and timely delivery

Now we will deeply discuss about our credit suppliers and on what financial ratios they depend.Creditors who supply material depends on the following ratios to take their credit decision ratios like current ratio and quick ratio which measures our company ability to meet current liabilities. If current ratio is less than 1 it indicates that firm current assets are less than current liabilities. So credit will not be given as the firm cannot meet it current liabilities with its current assets .so they will analyse like this to take decisions

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