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Financial Information for Managers Ref/Def assignment - Coursework Example
Author : nella28
Finance & Accounting
Pages 3 (753 words)
In the business world it is important to be able to evaluate the financial performance of company.Managers and other stakeholders such as suppliers and lenders depend on financial information in order to made decisions. …
In the business world it is important to be able to evaluate the financial performance of company. Managers and other stakeholders such as suppliers and lenders depend on financial information in order to made decisions. The four basic financial statements are the income statement, the balance sheet, the statement of retained earnings, and the statement of cash flow (Weygandt & Kieso & Kimmel, 2002). These statements are published in the annual reports of public corporations. The data contained in the financial statements can be utilized by financial analyst to make financial analysis such as vertical, horizontal, and ratio analysis (Besley & Brigham, 2000). The financial technique that will be analyzed and discussed in this paper is ratio analysis. Ratio analysis can be utilized to analyzed different aspect of the financial performance of an enterprise. There are different categories of ratio analysis. The five ratio analysis categories are liquidity, financial leverage, asset efficiency, profitability, and market value ratios (Peavler, 2011). Financial ratio analysis is a very effective tool because it can be applied to firms of any size including small, medium, and large firms. The functionality of ratio analysis depends on the proper appliance of the generally accepted accounting principles (GAAP) by the accountants of public and private firms. The financial ratios assess how well a company is doing from the standpoint of the stockholders of the firm (Garrison & Noreen, 2003). ...