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
Q. Working Capital Based on Operating Cycle? The concept of operating cycle, helps determining The time scale over which the current assets are maintained. The operating cycle

Modern / Discounting Cash Flow Techniques : These methods generally are of more use to businesses in their investment decisions. They take into account the time value of money and

1. Consider the following cash flows and reversion: There is an $80,000 cash outflow at time zero. BTCFs for years 1-4, respectively, are $10,000, $20,000, $20,000, and $25,000.

Have mergers affected competition? A: Federal Reserve data depict that measured on the local level, where competition occurs; markets have in fact experienced more banking comp

Q. How cash flow problems arise? It is significant first to distinguish between profitability and cash availability. The key scheme relates to insolvency since even profitable

We can compute any forward rate using the spot rate. When we tell 3 years forward rate 4 years from now, there are two elements to consider. One is the length of

Sovereign debt is a debt instrument guaranteed by the government. The other names for sovereign debts are sovereign bonds or government bonds. They are issued in

State the factors of Tests of controls Tests of controls may include ยท Enquiries and observations corroborating internal control functions. Inspection of docu

Timing of Financial Reports: Just as the actual report requirements differ depending on the requirements of the stakeholder that will be using them, so too will the timing of t

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annua