Financial management
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Financial ratios are important to the understanding of the financial health of a company. You and your colleagues work for a financial services firm. You are discussing the merits of the various financial ratios. Identify four financial ratios, and state what they tell you about a firm and why it is important to understand what these ratios mean to both a bank and an investor. Be sure to include your reasoning regarding these issues.
Choose 4 different financial ratios from your text, course materials, and/or Web resources.
Answer the following questions:
What do they tell you about a firm?
Why is it important for a bank to understand these financial ratios?
Why is it important for an investor to understand these financial ratios?
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Choose 4 different financial ratios from your text, course materials, and/or Web resources.
The four different financial ratios that I have selected are the current ratio, the return on capital employed, debt equity ratio, and the fixed asset turnover ratio.
Answer the following questions:
What do they tell you about a firm?
The fist is the current ratio and it gives information about the liquidity position of a firm. This gives me information as to whether the company's short-term assets are adequate to pay off its short term liabilities. The second is the return on capital employed this ratio is found by dividing the net income by the total capital employed. This ratio enables me to understand better the ability of the company to get returns from its present capital base. The third ratio is the debt equity ratio. This ratio compares the company's total liabilities to its total shareholders' equity. This measures how ...
Education
- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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