Question

What is financial statement analysis for the american heart association? Select one of the ratios as your topic for discussion. Include what the ratio is designed for in terms of financial statement analysis. When responding to classmates, describe how your ratio selection compares to or contrasts the one that they selected.

Answer 1

Financial statement analysis refers to the study of financial condition of an organization. So financial statement analysis for the american heart association means analytical study of the financial statements such as balance sheet & income satatement of american heart association.

This financial statement analysis is done with the help of ratios such as profitability ratios, liquidity ratios, solvency ratios and activities ratios etc.

Now let’s select one ratio that is debt ratio.

Debt ratio is a financial ratio which measure portion of debt in the total assets of the firm. In other words we can say that how much portion of total assets is financed by the debts funds is measured with the help of debt ratio.

Formula of debt ratio = Total debt / Total assets

Suppose classmate selected a different financial ratio that is current ratio.

Current ratio is helpful in measuring liquidity of the firm. This ratio will tell about the relationship between current assets and current liabilities of the firm. In other words we can say that current ratio will help in knowing that whether a firm is able to meet is current liabilities with available current assets.

Formula of current ratio = Current assets / Current liabilities

Thus on the basis of above explanation it is clear that both financial ratios are different because debt ratio measures long-term solvency of the american heart association whereas current ratio will help in measuring short-term liquidity of this association. Thus both are different.