Financial Statement Ratios

Flash-based learning object Financial mastery dimensions Financial contention balances Your reference guide to: o classes of dimensions o specific balance formulas o alternative ratio calculations o rules of thumb o tips and guidelines General tips ? Ratio calculations can non be looked at in isolation. In order to interpret a ratio, you need to comp ar it to the ratio of the same telephoner over time, to bud prevailed results, or to different companies deep down the industry. ? If you argon apply ratio synopsis for investment decisions, be aware of the impact caused by using book values, rather than market values. ? Ratios reflect the past, and may or may not be indicative of the future. ? ? There are a bit of variations of calculating ratios, which can produce immensely different results. subroutine caution when interpreting ratios, and check the assumptions and conventions used. Ratios may change from breaker point to period, based on changes in accoun ting estimates and principles. Liquidity Liquidity ratios are used to quantify the companys ability to fit out its short obligations. Liquidity Ratios Current ratio practice menstruum assets veritable liabilities Measures the companys short-term debt paying ability ? Rule of thumb/ trait 2:1 or risqueer is considered cheeseparing.

A high running(a) capital ratio isnt always a good thing. It could head that there is too much inventory, or that the company is not investing its excess cash. Quick ratio Formula pee assets current liabilities Measures the extent to which the company can give pur suit its current liabilities with its quick! ly, or liquid assets Rule of thumb/ rendering 1:1 or higher is considered good. Quick assets secrete those that are readily convertible to cash (for example, cash equivalents, lucre accounts receivable, shortterm notes receivable, and short-term investments in marketable securities). Variation: Sometimes quick assets will be calculated more simply as current assets less inventories. A related and...If you want to set forth a full essay, order it on our website: OrderCustomPaper.com

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