This website uses cookies to ensure you have the best experience. Learn more

Ratio Analysis Paper

1236 words - 5 pages

IntroductionIn this paper, I will discuss the profitability, liquidity, and solvency ratios that affects acompany. The limitations of ratios and bench marking capabilities. Along with three questionsthat would provide good information about what ratios are important, which ones are importantto internal management and which ones are important to the creditors. The reader would have abetter understanding of each of the items that will be discuss in this paper.Probability RatioThe probability of an outcome for a particular event is a number telling us how likely aparticular outcome is to occur. This number is the ratio of the number of ways the outcome mayoccur to the number of total possible outcomes for the event. Probability is usually expressed asa fraction or decimal. Since the number of ways a certain outcome may occur is always smalleror equal to the total of outcomes, the probability of an event is some number from 0through 1.An example of a probability ratio would be as follows: Suppose a regular dice isrolled. What is the probability of getting a 3 or a 6? "There are" a total of 6 possible outcomes.Rolling a 3 or a 6 are two of them, so the probability is the ratio of 2/6 = 1/3. Website:http://www.mathleague.com/help/percent/percent.htm Retrieved on February10, 2009.Liquidity RatiosCommon liquidity ratios include the current ratio, the quick ratio and the operating cashflow ratio. Different analysts consider different assets to be relevant in calculating liquidity.Some analysts will calculate only the sum of cash and equivalents divided by current liabilitiesbecause they believe that they are the most liquid assets, and would be the most likely to be usedto cover short-term debts in an emergency. A company's ability to turn short-term assets intocash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcyanalysts and mortgage originators frequently use the liquidity ratios to determine "whether" acompany will be able to continue as a going concern. This website was retrieved on February 10,2009: http://www.investopedia.com/terms/l/liquidityratios.asp .Solvency RatioOne of many ratios used to measure a company's ability to meet long-term obligations.The solvency ratio measures the size of a company's after-tax income, excluding non-cashdepreciation expenses, as compared to the firm's total debt obligations. It provides ameasurement of how likely a company will be to continue meeting its debt obligations. Themeasure is usually calculated as follows:Acceptable solvency ratios will vary from industry to industry, but as a general rule ofthumb, a solvency ratio of greater than 20% is considered financially healthy. Generallyspeaking, the lower a company's solvency ratio, the greater the probability that the company willdefault on its debt obligations.Limitations of Ratios AnalysisAccounting Information has different policies that has choices that may changecompany comparisons. Like for instance, the business...

Find Another Essay On Ratio Analysis Paper

Financial Ratio Analysis of Metalrax Plc

1689 words - 7 pages "profitability", shareholder would choose return on shareholders' funds to make a decision whether invest a company or not; meanwhile, a bank would consider a company's return on capital employed before lending money. With significant accounting ratios, this paper assesses the profitability, liquidity, management of working capital and the capital structure of Metalrax Group plc and finally compares performance and financial position between two

How Have Banks Managed Their Capital – A Ratio Decomposition Analysis

2727 words - 11 pages How Have Banks Managed Their Capital – A Ratio Decomposition Analysis Abstract This paper is motivated by the conflicting evidence in prior bank capital structure literature and the lack of resilience of bank capital to the current financial crisis of 2007-2010. The paper analyzes the reaction of banks’ asset portfolio and capital structure to adverse changes of regulatory capital ratios. Based on management discretionary decisions

Ratio Analysis & Statements of Cash Flow Final Report

3167 words - 13 pages Final PaperStakeholders "rely on the company's periodic financial statements to provide basic information on the profitability of the firm" (Brealey et al, 2003, pg. 449). The information included in this paper will illustrate Wal-Mart and Target's history, products and services, and annual reports. These reports are intended to provide investors, creditors, and shareholders a glimpse into the financial successes and challenges a company goes

Fixed Ratio Schedule Training with Lab Rats

2507 words - 10 pages Abstract The purpose of this paper is to explore the examined effects of the subjects' behavior change as a function of a schedule. Rat participants were placed in an operant chamber for sessions of habituation, magazine training, and shaping on a fixed ratio schedule of reinforcement. These rats did not have any previous exposure to the operant conditioning chamber, or any training. These rats were to press a lever for reinforcement on a fixed

Ratio Analysis

1965 words - 8 pages Ratio Analysis Ratios are a method of summarising and presenting financial information in an easily understandable form. They are used to assist us in assessing the performance of a business by identifying relationships between different figures that are considered to be significant. Ratios can be split into five groups, these five groups are: 1. Cash Flow – These ratios measure the businesses ability to meet financial

Ratio Analysis

677 words - 3 pages Companies strive from day to day to make their business publicly strong, financially strong, and appeasing and profitable for its shareholders. Shareholders as well as the company’s management use several tools to determine a company’s health and direction. These tools are better known as ratio analysis. Ratios are among the more widely used tools of financial analysis because they provide clues to and symptoms of underlying conditions.2 Ratios

Ratio analysis

1527 words - 6 pages positions under the macro and task environmental analysis. They can be deduced by the internal situations analysis, namely ratio analysis. What we can need is set in the major assignment part A. At the same time, we have known the relevant expenses, dividend information for the two businesses. Secondly, we analyze the investing objective and the likelihood of achieving it, evaluate the two choices and opt ultimately after the study of all kinds of

Ratio Analysis

1443 words - 6 pages Ratio Analysis Ratio analysis is a process of determining and presenting the relationship of items and groups of items in the financial statements so as to provide information to the financial statements in a concise form. In the words of Myres, “ Ratio analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a

Ratio Analysis

2709 words - 11 pages . The financial ratio analysis comprises of four parts, which are as follows (Gowthrope, 2003): i. Performance Ratios · It is used to assess the relative success or failure of business performance.ii. Working Capital Efficiency Ratios · It is used to assess the extent to which asset and liability items are well utilised and well managed.iii. Investment Ratios · It is used to assess various items of particular interest to

Skewed Sex Ratio in India: Stopping Female Foeticide

2257 words - 9 pages indeed act as blackholes in India's demographic transition and are symptoms of the collapse of the civilisation. While Fred Arnold and T K Roy in their paper "Sex Ratios and Sex-Selective Abortions in India : Findings from the 1998-99 National Family Health Survey" calculated the sex ratio of last birth. They found that in every state, except Meghalaya, the sex ratio of last births was much lower than the sex ratio of other births. For instance

Golden Ratio

1611 words - 7 pages It was once said by Johannes Kepler that “Geometry has two great treasures: one is the Theorem of Pythagoras, and the other the division of a line into extreme and mean ratio. Golden Ratio is found by dividing a line into two parts so that the longer part divided by the smaller part equals the whole length divided by the longer part. It is also known as the extreme and mean ratio. Golden ratio is very similar to Pi because it is an infinite

Similar Essays

Ratio Analysis And Statement Of Cash Flows Paper

1430 words - 6 pages Dell verses GatewayThe two publicly traded companies chosen were Dell and Gateway. Both of these companies are well known for their technology in the personal computer industry. Based on the ratio analysis and statements of cash flows Dell is doing better in the market than Gateway.Record global product shipments, revenue, operating and net income, earnings per share and cash from operations made Dell's fiscal year 2005 the best reporting period

Ratio Analysis For Facebook

952 words - 4 pages Ratio Analysis for Facebook Introduction The financial position of a company offers great insight on the performance of the company on short-term and long-term basis. This work argues that Facebook Inc. is a company with a subjective investment portfolio. The purpose of this paper is to use ratio analysis to determine the position of the Facebook as an investment destination. The first section explores two ratios and their implications to a

B/M Ratio Essay

1099 words - 4 pages indicate that the difference is unstable and insignificant. Generally speaking, our results for ND/M are different with that in PRT’s paper, in which they get an inverse leverage effect based on US evidence. Based on the equation (2) of PPT theory, the future expected returns should increase by increasing the leverage of the company; Furthermore, if the leverage ratio is given, the future expected returns are determined by the operating returns

Financial Ratio Analysis Of Two Companies

3173 words - 13 pages Company In a Different Industry12Changes in Assessment Method12Conclusion13References14Appendix A - Sample Company's Financial Statements from 1999 - 200115Appendix B - Financial Ratio Analysis of Sample Company19AbstractThis research paper will evaluate Sample Company using review standard financial ratio analysis techniques and assess its potential as a good investment. This is written in the form of a memo to the CEO of an Alabama-based firm