Financial ratios, Financial Management

Financial Ratios:

Another method of measuring and monitoring performance is through the use of financial ratios and other comparative tools.

Financial ratios use information contained in reports such as the balance sheet and the profit and loss statement. From this information, calculations can be made which provide an indication as to the overall performance of the business. The results of these calculations can be used to compare the performance of the business against targets (as established in the budgeting process) or against the performance of similar businesses (through benchmarking exercises).

The calculations can take the form of ratios which provide an easy figure by which comparisons are made.

There are many financial ratios that are used to measure financial performance of a business, however for the purposes of this module we will look at the principal ratios used to assess:

  • Liquidity of a business (the ability to meet short term obligations)
  • Profitability of a business (how well the assets are used to create wealth)
  • Solvency of a business (the ability of a business to meet long term financial obligations)
Posted Date: 10/1/2012 4:00:10 AM | Location : United States







Related Discussions:- Financial ratios, Assignment Help, Ask Question on Financial ratios, Get Answer, Expert's Help, Financial ratios Discussions

Write discussion on Financial ratios
Your posts are moderated
Related Questions
how do we get the pvif of a perpetuity

Z works for HS Company and has been asked to undertake an assessment of any health and safety issues that might be potential hazards in the department which she manages. Z's respon

Types of Warrants The warrants can be classified into different types. They are: Detachable Warrants These warrants are issued with most debentures, like convertible o

What are "in-market" mergers? A: An in-market merger is one that occurs between two banks operating in similar geographic area, usually a city or metropolitan area. The merged in

What is the annual tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on debt is 8.5% and the marginal tax rate

WHAT IF BALANCE DOES NOT EXIT

What is the operating leverage effect and what causes it?  What are the potential benefits and negative consequences of high operating leverage? The phrase operating leverage e

Why do analysts calculate financial ratios? The comparative measures are known as Ratios. Since the ratios show relative value, they permit financial analysts to compare inform

The objective of the assignment is to develop an understanding of the factors that influence changes in the prices of stocks. *A person has $ 100,000 that they have to invest in s

Asset management Ratios (Turnover Ratios)   Receivables Turnover Ratio  It is a measure of receivables turnover.   Payables Turnover Ratio  It is a