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Business Financial Metrics - Essay Example
Finance & Accounting
Pages 5 (1255 words)
Business Financial Metrics Name: Institution: Business Financial Metrics Financial statements or reports are fundamentally formal reports, which spell out business financial activities. For business entities, all significant financial information is submitted through a structured manner and an effortlessly intelligible format through financial statements…
Company managers, investors and government regulators utilize various metrics and ratios to analyze company financial statements such as income statements and balance sheets so as to determine the fiscal viability of the organization in the short and long term. This paper will examine some of the ratios and metrics utilized by various stakeholders to appraise different financial statements, examining how various stakeholders can successfully employ the metrics and ratios in their decision making. The examination of balance sheets entails the use of financial ratios as the primary metrics. These ratios include the quick ratio, leverage or debt-to-worth ration and current ratio. The current ratio, which is also referred to as the liquidity ratio, measures the liquidity or solvency of an entity (Higgins, 2009). This metric offers investors a measure of the business’ capacity to pay its current liabilities using its current assets. Investors typically use this information to decide whether or not to invest in a business. A high current ratio means the company has vast capabilities to pay its short-term debts using short-term cash. ...
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