Financial Ratio Analysis: Major League Baseball

Financial ratios are useful indicators of a firm’s performance and financial situation (Friedlob & Schleifer, 2003). Ratios can be used to

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.

Ratio analysis are useful tools when judging the performance of a company by weighing and evaluating the operating performance (Block-Hirt). There are 13 significant ratios that can separate by four main categories,

Ratio is a useful measuring tool as a part of financial statement analysis. It usually categorized as three kinds that named liquidity ratio, solvency ratio and profitability ratio, each ratio assist in valuing the efficiency and profitability of a company based on its annual financial report.

Financial ratios provide a means to analyze the operations of a company in comparison to its industry and its historical results.

As professionals, we must constantly analyze our position. When we look at the company, we must evaluate the performance and make those comparisons of historical figures in-house and with the industry competitors. This analysis must not be taken lightly with easily attainable numbers such as sales, profits or total assets. As the adage goes, we need to “read between the lines” of the performance data looking past, the seeming inconsequential figures and develop them into figures that are accessible and comprehensible. Comparative analysis assist us to identify and quantify the strengths and weaknesses, take a decisive look at the financial position, understand the risk and develop a course of action if required. As with most things, ratio

Financial ratios are useful indicators of a firm’s performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm’s financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy.

The financial data of company does not tell us the entire position of an organisation and its performance over the year or certain period of time for comparative purposes. Therefore, the use of ratios

When deciding to invest there should be an extensive analysis of the company’s financial statement should be done. The analysis should involve a comparison of the company’s performance with other companies in the same industry. It should also involve and evaluation of trends in the company’s financial position over a period of time. The use of financial ratios is a way to gain important information that is neither simple nor obvious. Financial ratios are calculated by using data that can be found on the company’s balance sheets and income statements.

I have chosen this topic for my coursework because I find ratio analysis the most common way to evaluate the performance of an enterprise and its interest for investor. As in future I plan to work in a financial department, this analysis was of great interest for me.

Ratios analysis is used in creating benchmarks for comparative analysis. Though ratio analysis should be used to compare companies within the same industry, it can be used in cross-section analysis.

Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.

Financial management and efficient planning are important in determining the sustainability and the mission of a business. A company can know its organizational performance, financial results, and trends by using its financial statements. Conducting a ratio analysis through ratio calculation is vital. Ratios calculation is a useful tool of management because ratios are critical indicators of financial strengths and weaknesses and thus the basis of the overall situation analysis. Some of the significant financial ratios include; profitability ratios, leverage ratios, activity ratios, and liquidity ratios (Tugas & CISA, 2012). These ratios can identify financial trends for the company and can be used to make industry comparisons. Ratios

With the help of financial statements that arise by the firm, analytical methods can be used to get information about the course of the business and the economic state. By calculating a small number of ratios it is possible to develop a clear picture of the position and performance of a firm (P.Atrill and E.Mclaney 2013). Financial ratios have two main users, management and inventors. Management uses financial ratios to analyse, control and determine the performance of their company. This will allow companies to improve in the areas where they are weak. On the other

Discuss the usefulness and limitations of financial ratios in evaluating the performance and management of companies