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Financial Ratio: users, primary objective of financial mgr

What are the primary groups that compute or use financial statement ratios? Identify the primary concerns of each group.

What does it mean that that balance sheet is a snapshot of the firm at a point in time?

How is the balance sheet different from the income statement?

What would you say is the primary objective of a financial manager?

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There are several different groups that use financial ratio analysis. Who are these groups and what are the primary concerns of each?

The classic groups are creditors, analysts, and investors. Regulators also use them but to a lesser extent. The credit is most interested in whether the debt will be repaid. The analysts are most interested in forecasting future cash flows to value the business or financial instrument and compare it to others. The investors are most interested in whether the stock will give them a good return, be safe (not lose money) and be sell-able when they need their cash.

It has been said that a balance sheet is a snapshot of the firm at some point in time. What does this mean? How does it differ from what the income statement is showing?

The balance sheet shows the resources that are left over after all the transactions reported in the ...

Solution Summary

Your discussion is 329 words and explains the three main groups that use ratios. It gives an analogy to help you understand the balance sheet versus the income statement. The main duties and roles of the financial manager are presented and described.

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