ACC 557 Week 10 DQ2
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This 0 page Study Guide was uploaded by an elite notetaker on Wednesday November 11, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 24 views.
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Date Created: 11/11/15
ACC 557 Week 10 DQ2 Financial Analysisquot Please respond to the following Determine three key ratios that should be used When evaluating the financial performance of a company indicating What information this Will reveal to an analyst and the impact to decisions made about the company Given that financial analysis is reactive based on events that have already occurred suggest how financial analysis may obtain information to be proactive to the decisionmaking process Provide support for your rationale The three key ratios that should be used When evaluating the financial performance of a company are liquidity ratios profitability ratios and solvency ratios Liquidity Ratios measure the shortterm ability of the company to pay its maturing obligations and to meet unexpected needs for cash Shortterm creditors such as bankers and suppliers are particularly interested in assessing liquidity Types of Liquidity Ratios current ratio acidtest ratio receivables turnover inventory turnover Profitability Ratios measure the income or operating success of a company for a given period of time Income or the lack of it affects the company39s ability to obtain debt and equity financing It also affects the company39s liquidity position and the company39s ability to grow Types of Profitability Ratios profit margin asset turnover return on assets return on common stockholders39 equity earnings per share EPS priceearnings PE ratio payout ratio Solvency Ratios measure the ability of a company to survive over a long period of time Long term creditors and stockholders are particularly interested in a company39s ability to pay interest as it comes due and to repay the face value of debt at maturity Types of Solvency Ratios debt to total assets ratio times interest earned Companies should run reports at regular intervals to assess the financial health of the company Monthly reports should consist of Profit and Loss and Balance sheets at a minimum Profit and Loss Previous Year Comparison Will tell the company how they are doing compared to the previous year There is no better marker for analyzing trends and patterns in a company The balance sheet tells the true health of the company Sources Weygandt Kimmel ampKieso 2010 Financial Accounting 2010 Custom Edition Hoboken NJ John Wiley amp Sons Inc httnIIWWWbetterboolgbzrenortg
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