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Article example - Based on 2006 and 2007 Broome County CAFR
Finance & Accounting
Pages 3 (753 words)
BROOME COUNTY CAFR Introduction Financial Analysis is a systematic process for assessment of stability, viability and profitability of any business. The analysis is derived from the published financial statements of business organization. The most popular tool for financial analysis is derivation of financial ratios from balance sheet and income statements…
Extract of sample
In order to assess the long term solvency of the firm there are many standard ratios available such as Debt size ratio, Debt to equity ratio, Cash flow coverage ratio, Debt service as percentage of revenues, and so on. In this study the long term solvency of Broom County was analyzed using two key ratios namely Debt size ratio and Debt equity ratio. The formulas for the respective ratios are as follows, Debt Size Ratio = Total Debt/Total Asset Debt-Equity Ratio = Total Debt/Total Net Asset In order to determine the values of the ratios, the financial statements for the year 2006 and 2007 of Broom County was analyzed and the following results were found, Interpretation Debt Size Ratio This ratio measures the degree of financial leverage of the company, and generally higher values indicate higher financial risk. The ratio indicates whether the company is in a better financial position to service its total debt with its total assets. If the value of this ratio is more than 1, then it indicates that the firm has more debt compared to its assets. ...
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