Ratio analysis and financial analysis
Not what you're looking for?
Tell what four ratios would be helpful in assessing the financial strength of a company and why each ratio would be helpful.
Which is more important to the short-term lender: the stock of cash or the flow of cash? Why?
Can a businesses operate with no current liabilities? Why?
Purchase this Solution
Solution Summary
The answer contains the ratios which are helpful for assessing the financial strength of the company, importance of stock of cash and flow of cash to short term lender and also answers for whether the company can operate without any current liabilities.
Solution Preview
Ratios depict the relation between the two items in the financial statements. Ratios are helpful to analyse the financial strength or weakness of the particular undertaking. Ratios are helpful to reveal the inner strength/weakness, thereby showing the real picture of the financial statements. Ratios are helpful in interfirm or intrafirm comparison.
Four ratios that would be helpful in assessing the finacial strength of the undertaking are as follows:
1.Net Profit Ratio:
Net Profit/Turnover * 100
Here net profit means Gross profit- operating expenses and administrative expenses
Gross Profit= sales-cost of production
Cost of production=opening stock+ purchases-closing stock+direct expenses.
If this ratio is higher than the industrial standard or if it is higher than other competing firms in the same industry, then it shows that the company is able to generate sufficient profit from ...
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.