FINANCIAL ACCOUNTING: TOOLS FOR BUSINES
9th Edition
ISBN: 9781119595649
Author: Kimmel
Publisher: WILEY
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Give your insights into the relative solvency or stability of the company (as benchmarked with the competitors) using the following ratios:
debt ratio
times interest earned ratio
debt - equity ratio
Describe why an Investor would use Profitability Ratio’s? What are the following ratio's measuring (i) Return on Assets, (ii) Return on Equity, (iii) Profit Margin.
Describe why a CEO would use Activity Ratio’s? What are the following ratio’s measuring (i) Days Receivables Outstanding, (ii) Inventory Turnover.
Describe why a Bank would use Solvency Ratio’s? What are the following ratio’s measuring (i) Current Ratio, (ii) Acid-Test, (iii) Debt Ratio, (iv) Debt to Equity Ratio, Times Interest Earned ratio
How would current and quick liquidity ratios be used by management to run the business, investors for valuation purposes, and bankers for lending purposes? How do I determine if my quick ratio is important or not.
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- What are financial ratios? Using numerical values from financial statements, financial ratios are created to obtain useful information about a company. Using the numbers on a company's balance sheet, income statement, and cash flow statement, quantitative analysis of a company's liquidity, leverage, growth, margins, profitability, rates of return, valuation, and other factors can be performed. Financial analysis ratio is used for 2 main purpose; to track the company’s performance and to make comparative judgements of the company performance. Users from outside: Retail investors, financial analysts, creditors, rivals, tax and regulatory authorities, and industry observers are internal users. Owners, employees, and the management team.arrow_forwardHow you can assess the company’s performance with financial ratios? Select any company and analyzes the current situation of financial statements with the help of rations.arrow_forwardplease explain in detail how I can use the solvency ratios, debt ratio and gearing ratio, analyze the performance of a small businessarrow_forward
- There are different tools for analyzing the financial statements of a company, such as horizontal analysis, vertical analysis, ratios for measuring financial health, and so forth. But before we begin using these tools, it is important to know the purpose of each tool. Please discuss one of these tools.arrow_forwardWhat do the following ratios reveal about the financial health of a company? And how do I calculate them? Liquidity of Short-term Assets Current Ratio Cash Ratio Quick Ratioarrow_forwardFinancial Statement Analysis tells you if your company is on the right track. Are you growing, making more money? Find out why the Liquidity, Leverage, Profitability, and Cash Flow Ratios are so important to a company's survival? List at least '1' for each category, describing how it is calculated, and what it means.arrow_forward
- Please see below. Be sure to include an explanation as well. If you were a user of financial statements, what type of ratio/analysis do you think would be most important to use to make sure the company you have invested in is doing well? What would you look for in a company that you were considering investing in?arrow_forwardWhich of the following financial statements would be most useful if an analyst wants to know the profitability of a company? A. balance sheet B. statement of cash flows C. statement of retained earnings D. income statementarrow_forwardYou are trying to assess the well-being of the common stockholders of a company. Which of the following ratios would help you make such an assessment?(a) Debt ratio(b) Current ratio(c) Book value per share(d) Total asset turnoverarrow_forward
- How do companies can get and record funding? There are three ways: from Liabilities, from issuing Stocks, or from Profitable Operations. • Describe each of these three ways and indicate where on the financial statements you could find the information about each. Hint: It might be in more than one place. • Give the advantages and disadvantages for each. • Give an example for each and show some ways to record the transaction in the accounting.arrow_forwardWhich of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the relative levels of liquid assets of the company. b. They show the relative proportion of debt items with respect to shareholders' equity or total capital. c. They show the profitability of the company over a specific period of time. d. They show the probability of whether the company will face problems in operations.arrow_forwardRefer to exhibits 2.1 and 2.2 to use the data to evaluate current ratio, quick ratio, debt ratio, times interest earned, payables turnover, receivables turnover, inventory turnover, return on equity, return on sales, payables conversion period, receivables conversion period, inventory conversion period, and cash conversion cycle. Then comment on the financial strength or weakness of the corporation based on these ratios and cycles.arrow_forward
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