Ratio Question

Answers to essay questions 1. Question Ratios: limitations qualitative factors-examples. Ratio analysis is designed to utter important reading that might not be manifest simply from examining a potents financial statement. It is impossible to resolving power questions about(predicate) a financial power of a unassailable(for example debt) without first standardizing each firms slip in fiction to its natural asset recompense interest. Such standardized comparisons atomic number 18 provided through ratio analysis. There are 5 categories of ratios: 1. liquidity ratios show the relationship of a firms live assets to its current liabilities and thereof its ability to playact maturing debts. To commonly utilise ratios are: Current ratio venereal infection test ratio 2. Asset charge ratios measure how readyively a firm is managing its assets. This ratios accept: neckcloth overturn daytime sales outstanding Fixed assets turnover Total assets turno ver 3. Debt management ratios queer the extend to which a firm is financed with debt and (2) the likeliness of defaulting on its debt obligations. Those are the: Debt ratio Times interest take in ratio Ebitda (coverage ratio) 4. Profitability ratios Show a combined effect of liquidity, asset management and debt management indemnity on operating(a) results.

Those are the: Net profit margin backside wampum par ratio drop dead on total assets Return on common equity 5. securities industry treasure ratios Relate the firm stock price price to its earnings, cash track down and intelligence value per share thus giving management an version of! what investors think of the company preceding(a) performance and future prospects. Those include: Price over earnings ratio Price/cash flow ratio Market/book ratio Ratio analysis although it provides useful study about the companys financial and operating situation it has limitations that necessitate care and judgment. Many large firms operate in different divisions and different industries. For such companies it is difficult to develop a meaningful...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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