Financial ratio analysis is conducted by managers, equity investors, long term creditors, and short-term creditors. What...

Financial ratio analysis is conducted by managers, equity investors, long term creditors, and short-term creditors. What is the primary emphasis of each of these groups in evaluating ratios?

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Management: ratios point out weaknesses to be strengthened and the fact that other parties are interested in ratios and financial appearances to be kept up for the firm to be regarded highly by creditors & equity investors. Taking managerial decisions for future growth of organisation. Design various policy measures, draft future plans and know how effectively resources are being utilised. Interested in Activity Ratios and Profitability Ratios.

Equity investors: primarily in profitability, but also to get information on riskiness of equity commitments. operational efficiency of business. Interested in Earnings per Share & Return on Equity, RoI

Long-term creditors: interested in the long term solvency of firm and assess ability of firm to pay interest and principal on time. Interested in debt ratio, coverage ratios, and profitability ratios.

Short-term creditors: Interested in timely payment of short term debts. Interested in Liquidity Ratios such as Current Ratio, Quick Ratios etc.

jeff jeffy answered 2 hours ago

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