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Financial budgets and ratios

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1- Financial ratios are used to analyze the relationships between data elements found on the financial statement. Critically discuss the following ratios measure: Profitability ratios, Liquidity ratios, Debt Performance ratios, and Asset Management ratios.

2- Financial budgets can be developed in different ways, depending on the needs of the organization. Discuss the difference between the following 3 types of budgets: Traditional budget, Flexible budget, and Zero-based budget.

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Two question that i want some help with:
1- Financial ratios are used to analyze the relationships between data elements found on the financial statement. Critically discuss the following ratios measure: Profitability ratios, Liquidity ratios, Debt Performance ratios, and Asset Management ratios.

Ratios help us in understanding the performance of the organization. It is the relationship between two or more financial figures. For the profitability analysis one should analyze the net profit margin to understand overall efficiency. ROI is used to know about the utilization of the assets. Gross margin indicates the direct efficiency of the organization. For liquidity one should assess the current ratio. Current ratio= Current Assets/Current Liabilities & Quick Ratio= Quick Assets/Current Liabilities helps in judging the liquidity of the company. Current ratio helps in knowing about the short term liquidity of the ...

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Solution helps in discussing the financial budgets

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Financial Statement Analysis, Flexible Budget

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R.J. Falk is the chief executive officer of Ventura Electronics. Falk is an expert engineer but a Novice in accounting. Falk asks you, as an accounting major, to explain a) the bases for comparison in analyzing Ventura financial statements and (b) the limitations, if any, in financial statement analysis.
Write a memo to R.J. Falk that explains the basis for comparison and the factors affecting quality of earnings. Include a 350-700-word memo addressing the problem

Preparing a Flexible Budget
The flexible budget at the 70,000-unit and the 80,000-unit levels of activity is shown below.
70,000 Units 80,000 Units 90,000 Units
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400,000 $1,600,000 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . 840,000 960,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . $ 560,000 $ 640,000 $
Operating expenses ($90,000 fixed) . . . . . . . 370,000 410,000
Operating income . . . . . . . . . . . . . . . . . . . . . $ 190,000 $ 230,000 $
Income taxes (30% of operating income) . . . 57,000 69,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,000 $ 161,000 $
Complete the flexible budget at the 90,000-unit level of activity. Assume that the cost of goods sold and variable operating expenses vary directly with sales and that income taxes remain at 30 percent of operating income.

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