how do you do number 4 FINANCIAL STATEMENT ANLAYSIS EXAM II 1. (20) One page sin
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how do you do number 4
FINANCIAL STATEMENT ANLAYSIS EXAM II 1. (20) One page single spaced required- Describe and explain the purpose of a Balanoe Sheet and 2. (20) One page single spaced required-Describe and explain the purpose of an Income 3. (20) One page single spaced required- Describe and explain the purpose of a Statement of Cash 4. (40) One page single spaced required on each of the following Explain the purpose and how a manager uses it in a business, provide examples. Statement and how a manager uses it in a business, provide examples Flows and how a manager uses it in a business, provide examples provide examples of the following: Liquidity Ratios Activity Ratios Leverage Ratios Profitability Ratios Please write complete sentences and organized paragraphs and provide in-text citations and references If you have any questions, please let me know.Explanation / Answer
4.
Liquidity ratio
Liquidity is defined as ease of convert the assets in to cash. An asset is said to be highly liquid if investor can convert those assets in to cash instantly or very easily. Measure of liquidity ratio is Current Ratio and Quick ratio. Liquidy ratio measures, how efficiently comapny can manage its short term financing and able pay all short term obligations.
Current Assets is calculated by following formula:
Current Ratio = Current Assets / Current liabilities
Where, Items in current assets include Cash, Account receivables, Inventory, and other current assets. Current liabilities includes, Short term debt, account payables, and other current liabilities.
b.
Activity ratio or turnover ratio
Assets turnover ratio denote how effectively company able to use its total assets to convert them in to sale and profit. MAjor turnover ratios are, Total Assets turnover ratio, Fixed assets turnover ratio, inventory turnover ratio. These ratios measure the manager of comapny efficiency to cover assets of comapny into sale and profit. if turnover ratio is high then shows managers are using asets more efficiently.
Leverage ratio
Leverage ratio means proportion of debt in capital struction of company. if debt proportion in capital structure is high then company is called more leveraged. more leverage is one of the risk for company. major leverage ratios are, debt to assets ratio and debt equity ratio.
Debt to Assets
Debt to assets ratio tells about total assets the company has with compare to total debt. It means how much percentage of total assets finance by debt. If debt to Assets ratio is high it means there is high chance of insolvency and risk.
Debt to equity
Debt equity ratio tells about total equity of the company has with compare to total debt. If debt equity ratio is high it means there is high chance of insolvency and risk.
Profitability Ratio
Profitability ratio measures, the ability of the company to minimize the cost of operation and maximize the revenue. Major Profitability ratios are operating profit margin, Net profit Margin.
Net Profit Margin Ratio is calculated by following formula:
Net Profit Margin = Net Income / Total Sales
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