Determine The Financial Ratios That Are Important To The Business.

2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance.

The current ratio shows the short-term debt-paying ability of the company also known as liquidity ratio. Components of the current ratio are current assets and current liabilities. To find the current ratio, divide current assets by current liabilities. For example if a current ratio was 2:1, then that company would be able to pay off its short term debt easily. But you should also look at the types of debt the company has because some assets might be larger. For the current ratio a rule of thumb is the ratio should be around 2:1. The company wants to at least make sure that the value of the current assets covers at least the amount of the short-term obligations. In 2013 the current ratio is 1.75 and in 2014 the current ratio is 1.8. This is showing a favorable

Neil Kokemuller (2014). The Advantages and Disadvantages of Debt and Equity Financing. Retrieved from http://smallbusiness.chron.com/advantages-disadvantages-debt-equity-financing-55504.html

Ratio analysis shows the correlation within certain figures of financial statements, like current assets and current liability, and is used for three types of company needs- within, intra- and inter-company. Association can be shown in proportion, rate, or percentage and can evaluate company’s liquidity, profitability, and solvency. Liquidity ratios show company’s ability to pay obligations and fulfill needs for cash; profitability ratios show wellbeing and success for the certain time period; and solvency ratios show company’s endurance over the years.

This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.

Importance: It gives us the ratio for company’s capability of creating sales using their investment fixed assets.

Current: “The current ratio is a financial ratio that shows the proportion of current assets

a. Current ratio is known as the company’s ability to pay back their debits and obligations. The current ratio of .98 which is under 1 means the company would not be able to pay of the obligations that it owes. This shows the company is not in good standing and will cause more risk, if invested into.

Current ratio is a liquidity ratio that measures a company's strength to pay short-term and long-term liabilities. Current ratio is generated by considering the current Asset of a company in relation to its current Liabilities. That is current asset/ current liabilities.

Current Ratio is the measure of short-term liquidity. It indicates that the ability of an entity to meet its

In comparison to the current ratio, which was a round 2.25 and the quick ration at 1, the difference is very small. They have both been static. This shows that the company’s current assets are not dependant on the inventory. Management is in control of the finances.

The current ratio lets one know what is exactly happening in the business at the present time. The current ratio is defined as current assets such as accounts receivables, inventories any type of work in progress or cash that are divided by the business current liabilities. Business liabilities can consist of many things such as insurance on building, employee insurance these liabilities way heavy on any type of business especially one that is large as Landry’s Restaurant.

Financial ratios have proven to be a useful tool for effective financial management and planning. Primarily known for improving the understanding of financial results and trends over time, financial ratios are a unique way to provide a quantitative analysis to communicate overall organizational performance. This tool is useful for managers to focus in on the company’s strengths and weaknesses from which strategies and operations can be formed. Investors are also commonly known to use ratios to measure results against other companies to make appropriate judgments regarding management effectiveness and mission impact. For ratios to be deemed meaningful and useful, they require reliable and accurate calculated information. This is simple

Current ratio: Current ratio is the ratio of the current liabilities in terms of current assets of a business. This ratio determines the firm’s ability to meet out its debts over the coming period of 12 months. The firm 's ability and market liquidity to meet demands raised by creditors is indicated by this ratio. If a company 's current ratio falls within 1.5 to 2, then it indicates good short-term financial strength.

Current Ratio is the relationship between a company’s current assets and current liabilities. This form of liquidity ratio also shows if the company can pay its current liabilities. A company’s current ratio can be formulated by dividing the current assets by the current liabilities. In 2016, Starbucks had a ratio of 1.05, which shows that the company has 5% cash and assets that could cover all current liabilities, thus it should not have any problems paying its current liabilities.