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Ratios are one way to help assess the relative financial strength of an organization. Just as there are numerous ways that organizations can be organized, there are numerous different ratios that can be used to evaluate an organization's working capital and cash. Richard Loth breaks these various ratios into six different broad categories: liquidity measurement ratios, profitability indicator ratios, debt ratios, operating performance ratios, cash flow indicator ratios, and investment valuation ratios (2013). Liquidity ratios are focused on the company's ability to pay off short-term debt and compare a company's liquid assets to its short-term liabilities. Profitability indicator ratios help reveal how well the company is using its assets to generate profit. Debt ratios basically compare a company's debt to its equity or assets, which can help determine the financial strength of the company, indicate its creditworthiness, and warn of impending financial problems. Operating performance ratios focus on specific areas of operation in a company and give insight into the performance of that segment of the company. Cash flow indicator ratios examine how much cash is being generated and what type of safety net that cash provides to the company, taking...
Finally, investment valuation ratios are focused towards investors and help indicate whether the company is a good investment option.
Organizations can benefit by monitoring financial indicators in a number of ways. First, they provide a good overview of an organization's relative performance. Second, they can help an organization become aware of potential problems; for example, a company that is seeking financing would need to know if its debt ratio would make it appear credit worthy. Third, they can help organizations adjust their business plans for growth; cash flow indicators can help a company determine the appropriate amount of cash reserves based on adjusted business size.
References
Cleverly, W., Song, P., & Cleverly, J. (2011). Essentials of Health Care Finance (7th ed.).
Sudbury, MA: Jones & Bartlett Learning.
Zions Business Resource Center. (2005). How to analyze your business using financial ratios.
Salt Lake City: Zions Bank. Retrieved September 24, 2013 from Zions Bank website: https://www.zionsbank.com/pdfs/biz_resources_book-6.pdf?q=
3.4 Finally, I am interested in whether or not there is a trickle-down effect from leftist or rightist politics style at the provincial and federal levels. 1.3 Objectives 1.3.1 There are two major objectives for this research. The first is to compare the level of motivation among secondary school teachers under the Vancouver British Columbia School District in Canada by their socio-demographic and organizational factors. My hypothesis in advance of investigating this is
Childhood Obesity: Assessing the Effectiveness of the National School Lunch Program Assessing the Effectiveness of the National School Lunch Program: Childhood Obesity Childhood is a serious health concern for policymakers in the United States. It is estimated that currently, one in every five children below the ages of 2 and 19 in America is obese. For this reason, numerous policies have been formulated to help in preventing or minimizing the risk of
Ratio Analysis a) The price-earnings ratio reflects two things -- the company's earnings and the market price. By no means is there a law that says one firm's P/E ratio should be in line with either the market or the competitors. First, an explanation of the earnings. The earnings component of the P/E is past-looking. The profit margin for HRG is fairly low -- 1.7% - reflecting that its earnings are
financial analysis and more specifically financial ratios has been noted by Finkler, Marc and Baker (2007, p.253) to be important to managers since it can help them in making informed decisions. In this paper, we present the concept of ratio analysis as applied to healthcare facilities. The concept and purpose of ratio analysis Financial statement analysis is noted by Flex Monitoring Team (2005) to be very important to managers, boards, payers
Plume and Arrow: Ratio Analysis Financial ratios are regarded important decision making tools for financial analysts, business owners, investors and lenders. In addition to helping users determine the stability or profitability of a given entity, ratios can also be used to diagnose the underlying problems of a given business. This text seeks to determine which company between Plume and Arrow is healthier and hence less risky from a financial perspective based
This ratio eliminates the stock figure from that of current assets and like the current ratio; it is used to measure the liquidity of a firm. The quick ratio may in some instances be preferred over the current ratio as it is inherently difficult to turn some assets into cash. In regard to the two companies, the quick ratio brings out Plume Inc. As being more risky as it