The Managing Of The Financial Affairs Of An Organization Essay

Total asset turnover : This ratio measures the efficiency of a company’s use of its assets

Financial statements paint a picture of financial health of an organization. Important aspects of the financial statement of a health care organization are ratios. Analysis of ratios show how two numbers relate or compare to one another. Ratios are a way for organizations to make comparison. These comparisons not only encompass what is happening presently but can also be used to make comparisons about numbers and ratios over time. Ratios are a way for organizations to compare themselves with competitors and the industry. (Finkler, Kovner, and Jones, 2007). There are four major ratios that financial statements analyze 1) liquidity 2) activity 3) leverage and 4) profitability. The financial statement for Mayo Health System

To analysis financial statements there are various tools. Ratio analysis is one of them. In ratio analysis we establish relationship between two or more items of financial statements and derive some vital information about the business.

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,

Asset turnover depicts investment efficiency, because it shows how many sales dollars are generated for every dollar invested in the company’s assets. Lowe’s had relatively lower asset turnover ratios than Home Depot because their recent investment in PP&E.

3. Current Ratio: Take current assets over/divided by current liabilities for this straight forward ratio. Only main drawback is that this ratio excludes inventory, but the reason for that is because a lot of companies have difficulty with converting their inventory into cash. This can also lead to analysis being over or understated. This ratio, like the quick ratio/Acid Test, is an exceptional ratio for determining if a company can handle their short-term obligations.

Accounts receivable turnover measures how many times a company can turn its accounts receivables into cash. This ratio shows how well the company is collecting credit sales from its customers. The equation for accounts receivable turnover

The return on assets ratio measures the overall profitability of assets in terms of the income earned on each dollar invested in assets. Kohl's has a 8.3% but JC Penne only has 3.0%.

The paper illustrates that financial ratio analysis is an important tool for firm’s to evaluate their financial health in order to identify areas of weakness so as to institute corrective measures.

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,

The ratio that has the biggest difference is Debt to Assets Ratio and the one that has the smallest difference is Inventory turnover.

Abbott’s fixed asset and total asset turnover ratios can tell us how well the firm uses its assets to generate revenue. The fixed asset ratio provides the proportion of sales to fixed assets and tells us how much revenue is

The calculation of ratios is the calculation technique for analyzing a company’s financial performance that divides or standardize one accounting measure by another economically relevant measure. Financial ratios can be used as a tool to demonstrate financial statement users for making valid comparisons of firm operating performance, over time for the same firm and between comparable companies. External investors are mostly interested in gaining insights about a firm’s profitability, asset management, liquidity, and solvency.

In this ratio he explains about the three types of business inventory like raw materials, work in progress and finished goods. Formula to find the inventory turnover ratio and average age of inventory is: - inventory turnover = costs of goods sold/average inventory, Average age of inventory = 360 days/inventory turnover ratio.

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.