What financial statements and financial ratios can be used to quantify the financial health of a...

What financial statements and financial ratios can be used to quantify the financial health of a firm. How might this information be useful to individuals outside of the accounting world? Please include examples to support your posting.

Solutions

Expert Solution

Financial statements that are used to understand the financial health of the firm are Balance sheet, Profit and loss account, Income statement and Cash flow statement. These statements give the picture about the financial position of the firm and the financial transactions that has taken place in the firm. The financial ratios that are used to quantify the financial position of a firm are broadly classified into:

Liquidity ratio: It gives an idea about the ability of the company to pay-off the debt and have liquid cash. example: Current ratio, quick ratio etc.

Profitability ratio: It helps to understand the ability of the company to generate profits over a given period of time. example: Gross profit margin, Net profit margin.

Efficiency ratio: It is the analysis of the way in which the company is able to use its assets and revenue. example: Inventory turnover, accounts receivable turnover, accounts payable turnover etc.

Solvency ratio: It is used to measure the extent in which the firm's assets will be useful to pay off the debts of the company. example: Debt to Equity ratio, financial leverage etc.

jeff jeffy answered 6 months ago

Next > < Previous

Related Solutions

Are there circumstances when financial statements can quantify volunteers' services?

what can be a limitation of the accounting ratios for analyzing the financial statements

How financial analysts classify the ratios used during an analysis of a company's financial statements. What...

How financial analysts classify the ratios used during an analysis of a company's financial statements. What does each type of ratio tell us and provide a single example of each and why it is classified in that manner.

Financial Statements and Ratios

Problem:4The Fashion Place has an inventory valued at $875,000 on January 1. During January, stock costing $235,800 was purchased. At the end of January, the merchandise inventory is $685,255. What is the cost of goods sold for January? Problem:5The Luggage Emporium had net sales of $87,657 in October. The cost of goods sold in October was $43,775. What was the gross profit for October?

1. Signs that can be observed and measured and are used to quantify the changes that...

1. Signs that can be observed and measured and are used to quantify the changes that occurred due to nutrition intervention are called: A. Signs of causation B. Nutrition Care Indicators C. Nutrition Process Points D. Medical Points 2. The ___________________is a systematic problem-solving method that food and nutrition professionals use to critically evaluate nutrition-related problems and make decisions regarding them. A.Subjective, Objective, Assessment, Plan B.Medical Charting C.Nutrition Care Process 3. ___________________________is the action phase of the nutrition intervention. The...

1.Chapter 2 covers financial ratios. Financial ratios are calculated from a company's financial statements, and they...

1.Chapter 2 covers financial ratios. Financial ratios are calculated from a company's financial statements, and they can be used to determine how well a company is performing. Discuss in detail, the difference between a performance measure and a performance referent and provide a complete example of each. 2.Identify and discuss 5 different financial ratios, show how they are calculated (formula and data sources), and what the ratios seek to identify.

We have covered several ratios in this unit that users of financial statements can work with...

We have covered several ratios in this unit that users of financial statements can work with to evaluate a company’s performance. However, not all ratios are important for or applicable to all organizations. In particular, service organizations have different business models than manufacturing organizations. Using Facebook as a company, explain which financial ratios would be applicable to the company and which would not. State the reasons for your assertions.

We have covered several ratios in this unit that users of financial statements can work with...

We have covered several ratios in this unit that users of financial statements can work with to evaluate a company’s performance. However, not all ratios are important for or applicable to all organizations. In particular, service organizations have different business models than manufacturing organizations. Using the CPA Firm you worked with for your Unit 5 portfolio assignment, explain which financial ratios would be applicable to the company and which would not. State the reasons for your assertions. As portfolio activities...

We have covered several ratios that users of financial statements can work with to evaluate a...

We have covered several ratios that users of financial statements can work with to evaluate a company's performance. However, not all ratios are important for or applicable to all organizations. In particular, service organizations have different business models than manufacturing organizations. Using the company Apple Inc, explain which financial ratios would be applicable to the company and which would not. State the reasons for your assertions. As portfolio activities are to be self-reflective, please make sure to connect the portfolio...

We have covered several ratios in this unit that users of financial statements can work with...

We have covered several ratios in this unit that users of financial statements can work with to evaluate a company’s performance. However, not all ratios are important for or applicable to all organizations. In particular, service organizations have different business models than manufacturing organizations. Using the company you worked with for your Unit 5 portfolio assignment, explain which financial ratios would be applicable to the company and which would not. State the reasons for your assertion

Subjects