Question
In: Finance
it is often said that anyone with a pencil can calculate financial ratios,but it takes a...
it is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them. what kind of things should the analyst keep in mind when evaluating the financial statements of a given firm ?
Solutions
Expert Solution
Its true that anyone can calculate the financial ratios through formulaes but its tough to interpret the financial position through those ratios because in order to evaluate the financial statements of a firm one must be well acquainted with the importance and rationale of such ratios. therefore, the analyst shall keep in mind the rational of these ratios like while interpreting the current ratio the analyst must be aware that current ratio shows the liquidity position of a firm that is whether the firm has sufficient short term assets to pay off its short term obligations and he shall also know that 2:1 is the ideal current ratio. similarly he must be aware that debt equity ratio shows how much funds the firm has borrowed and how much investment of money has been made by its owners. it will depict the loans it has to pay.
likewise, return on investments shows with respect to investments made by a firm that how much profit it is going to generate on the same.
jeff jeffy answered 1 year agoRelated Solutions
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Ricardo Rocks (RR) is a public listed manufacturing company and we can calculate financial ratios from...
Ricardo Rocks (RR) is a public listed manufacturing company and
we can calculate financial ratios from its financial statements.
What financial ratio(s) would you analyze and why, if you are:
1. A supplier that requires payment of amount due in 2 weeks and
looking to extend credits to RR
2. A new investor interested to invest in RR
3. A banker looking to extend a long-term loan to finance RR for
a new investment project
Please explain in your own...
Ricardo Rocks (RR) is a public listed manufacturing company and we can calculate financial ratios from...
Ricardo Rocks (RR) is a public listed manufacturing company and
we can calculate financial ratios from its financial
statements.
What financial ratio(s) would you analyze and why, if you
are:
A supplier that requires payment of amount due in 2 weeks and
looking to extend
credits to RR
A new investor interested to invest in RR
A banker looking to extend a long-term loan to finance RR for a
new investment
project
Please explain in your own words.
Ricardo Rocks (RR) is a public listed manufacturing company and we can calculate financial ratios from...
Ricardo Rocks (RR) is a public listed manufacturing company and
we can calculate financial ratios from its financial
statements.
What financial ratio(s) would you analyze and why, if you
are:
A supplier that requires payment of amount due in 2 weeks and
looking to extend
credits to RR
A new investor interested to invest in RR
A banker looking to extend a long-term loan to finance RR for a
new investment
project.
Please provide a clear explaination
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the...
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financial statements for Tyler Toys, Inc. are shown below.
Calculate the debt ratio, times interest earned ratio, and cash
coverage ratio for 2013 and 2014 for Tyler Toys. Should any of
these ratios or the change in a ratio warrant concern for the
managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,147,996
$13,566,458
Cost of goods sold
$-8,448,120
$-8,131,722
Selling,...
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the...
Financial ratios: Financial leverage. The
financial statements for Tyler Toys, Inc. are shown below.
Calculate the debt ratio, times interest earned ratio, and cash
coverage ratio for 2013 and 2014 for Tyler Toys. Should any of
these ratios or the change in a ratio warrant concern for the
managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,146,008
$13,566,936
Cost of goods sold
$-8,448,426
$-8,131,134
Selling,...
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