Question

Financial ratios are essential to provide an accurate valuation of a firm. Select a publicly traded firm of your choice. Select one ratio each in the areas of (a) performance, (b) activity, (c) financing, and (d) liquidity warnings. Provide an evaluation of the selected firm's strengths and weaknesses. Based on the ratios you selected, how well does your chosen firm perform? Explain.

yes list the company . any fortune 500 company will work

Answer 1

Reliance industries Limited is an Indian company which is a fortune 500 company and there are various ratios which are related to the performance of Reliance which are as follows-

A. Performance ratio-performance ratio of Reliance industries will be including return on asset ratio which is 5% and return on equity ratio which is 12% which is the best in the Indian industry standard in which the Reliance operates.

B. Activity ratio- Activity ratio will include the account receivables turnover, inventory turnover and total asset turnover and Reliance is leading in maintenance of this ratio because turnover ratios of Reliance are best in the industry standard because the inventory is accurately managed as well as there is accurate management on the part of the total assets as well.

C.financial ratios which will include the profitability ratio and the profit margin ratio which is including the operating profit margin and the gross profit margin along with the cash profit margin and Reliance operating profit margin has been 16% along with the cash profit margin has been 13% so which is almost the best in the industry and it can be reflected into the share price of Reliance.

D. Recently,Reliance has been acquiring a whole lot of new businesses and that could mean that it's liquidity position is going lower and that could be a Red flag for the liquidity of the overall company.

Reliance is expected to perform best in the industry standards and it has telephone giant also with Reliance jio,which is hot favourite of of various stakeholders abroad so this company is going to perform better and which can be reflected that even in the coronavirus crisis' it is hitting 52 week high.