Analysis of Financial Statements - Minicase Chapter 3

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Mini Case Chapter 3 A. Ratios are used to standardize numbers, facilitate comparisons, and highlight both weaknesses and strengths. In addition, ratios are important profit tools in financial analysis that help financial managers implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. Managers use ratios to help them effectively run the business. Creditors use ratios for risk analysis. Equity investors use the ratios for stock valuation and to estimate the value of the organization. The 3 groups that use ratios are stockholders for stock evaluation, managers/investors to help run the business and bankers for credit analysis. B. 2011 Current Ratio…show more content…
| |Accounts Payable |9.9% |11.2% |10.2% |11.9% | |Notes Payable |13.6% |24.9% |8.5% |2.4% | |Accruals |9.3% |9.9% |10.8% |9.5% | |Total Current Liabilities |32.8% |46.0% |29.6% |23.7% | |Long-Term Debt |22.0% |34.6% |14.2% |26.3% | |Common Stock (100,000 Shares) |31.3% |15.9% |47.8% |20.0% | |Retained Earnings |13.9% |3.4% |8.4% |30.0% | |Total Equity |45.2% |19.3% |56.2% |50.0% | |Total Liabilities And Equity |100.0% |100.0% |100.0% |100.0% | Computron has a higher ratio of inventory and current assets than industry. In addition, it has more equity, which means it has less debt than industry. Computron has more short-term debt, but less long-term debt than industry. Common Size Income

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