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The financial evaluation of an organisation using ratio analysis. - Essay Example
Pages 12 (3012 words)
Introduction Every business, no matter small or large, constantly evaluates its company’s performance by comparing it with competitors, industry and its own past performance. In order to do so, businesses not only look at the figures of sales, profit and costs but also prepare other criterion for measuring performance which helps in reading between the lines of financial statements…
By comparing the ratios with the competitor of the firm or with its past performance, a clear idea can be obtained. For this purpose, the company which has been chosen is Roll Royce. It is a diversified company having its operations in the field of aerospace, nuclear market, civil defense and marine and energy. It was founded in 1971 and has its headquarters in London, United Kingdom. This paper examines the performance of Rolls Royce over the several years. For this regard, key financial ratios have been calculated for Rolls Royce. In order to evaluate the performance of the company, the ratios have been compared with its major competitors and Industry Standards. A brief interpretation of the financial ratios of Rolls Royce and its major competitors is also mentioned. Key Financial Ratios In this regard, some key financial ratios help in identifying and assessing the financial position, strengths and weaknesses of a company. These ratios can be broadly divided under the following mentioned categories. Activity Ratio Efficiency Ratio Asset Utilization Ratio Profitability Ratio Leverage Ratio Investors Ratio Activity Ratio Activity Ratio also called as Liquidity Ratio helps a firm in determining the ability of a firm to meet its current liabilities. ...
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