Question

Of the financial analyses that are conducted on a firm's financial health, which category of financial analyses would be important to an investor? Explain why.
Please no handwritten answers.

Answer 1

Important category of financial analysis for Investor- There are some ratios that are important for investor:

P/E Ratio- It is relationship between price of the stock and earning per share. This ratios tells how much price, investors are paying in a single dollar and how much they are getting for the same. It tells their value of money.

Earning per share- This ratio tells the earning that shareholders get from the net income. This ratio is calculated by dividing net income by number of outstanding shares.

Dividend payout ratio- This ratio tells how much company is paying as dividend to shareholders. Dividend is the income for shareholders.

Return on Equity- This ratio tells the return that shareholders get by investing their money.

Current Ratio- This ratio tells the liquidity of the company, investors choose the highly liquid companies.

Apart from the above ratios, investors also see the revenue, net profit, Total assets etc. of the company before taking investment decisions.