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Managing Financial Resources - Essay Example
Accounting is a method of keeping financial records of business transactions and for the preparation of statements concerning the business' assets, liabilities, and operating results. Accounting consists of several aspects; one of which is bookkeeping. A bookkeeper keeps tracks of all the company's transactions and keeps the ledgers of the company balanced…
Proper accounting supports company officials while they make these decisions, showing them whether or not an investment will be practical, and if the company can afford it. Ethical and professional accounting forms a clear financial image of a business, and allows managers to make informed decisions, keeps investors abreast of developments in the business, and keeps the business profitable.
The business performance of a company can be monitored and analysed with the use of accounting ratios. The ratios are used to interpret financial information about the company. The results can be compared with past results or with industry standards to gauge the company's overall performance. The quantitative results for this segment can be found in the Appendices section of this report.
Company A's Current Ratio is 1.17, while Company B has 1.03 and Company C resulted in 2.5. This means that all three companies are still able to generate enough cash to settle its short-term liabilities. As a guide, a current ratio of 2 is ideal. For Company C, its result is higher than the ideal guideline and this suggests that Company C may have resources lying idle, for instance, the untimely collection of its receivables. ...