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Case Study Golden Agri Corporation

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Organizations use financial statements to measure their performance in a number of ways. One way is through comparison with past statements. The past statements are a benchmark against which the company evaluates the current statements. The second way is that the statements are used to compare against the statements of other, similar companies. This gives the firm insight as to where its performance stands in relation to that of its closest competitors. The third way in which firms use financial statements to evaluate firm performance is through ratio analysis. Companies calculate a series of ratios based on the figures and then use these ratios to help gain insight into specific areas of success or concern

There are several types of ratios that are analyzed. These include liquidity ratios, debt ratios, profitability ratios and efficiency ratios. Golden Agris liquidity ratios provide insight into the companys short-term financial health. The first liquidity ratio is the current ratio. For Golden Agri this is 1.29 for 2008 and 1.47 for 2007. The quick ratio is 0.5 for 2008 and 0.51 for 2007. The cash ratio is 0.25 in 2008 and 0.28 in 2007. These figures indicate two things. Golden Agri has acceptable liquidity,