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Ratios Tell A story assignment - Essay Example
Author : cullen49
Finance & Accounting
Pages 5 (1255 words)
Ratios tell a story assignment Introduction Different people use financial statement for different purposes. The creditors or the lenders want to know about the financial capability of the firm to repay the borrowings. Investors are interested in the profitability position and solvency position of the firm as these generate high return for them in the future…
However, it is very difficult for one to examine the whole financial statements of a company. Ratio analysis makes it easier for everyone to understand the profitability, solvency, and efficiency position of the firm. Ratio Analysis is a tool used for quantitative analysis of the information from the financial statement of a company. In spite of the advantages, ratio analysis has several drawbacks too. It consider only historical data, the future performance of the company cannot be predicted. It helps to evaluate firm’s financial status on the basis of past and present financial data of a company. In this study, comparisons of ratios have been made on different companies according to their financial indicators. A ratio analysis has been conducted to compare the profitability, solvency and efficiency of Wal-Mart and Safeway. Ratio analysis helps to effective analysis of the financial statement. The financial status of the companies can be easily understood by the help of the ratio analysis. Safeway vs. Wal-Mart Safeway Inc is a supermarket whereas Wal-Mart is general merchandise. Wal-Mart can also be classified as hypermarket. Hypermarkets are similar to big-box stores. The business of hypermarket is decisive on high volume, and low margin of sales. ...