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Sunday, February 10, 2019

ratio analysis Essay -- essays research papers

mo give the sackary Ratios What They MeanIn assessing the importation of various financial data, managers often engage in proportionality psychoanalysis, the wreak of determining and evaluating financial proportions. A financial ratio is a race that indicates something about a companys activities, such as the ratio between the companys current assets and current liabilities or between its accounts receivable and its annual sales. The basic arising for these ratios is the companys financial statements that contain figures on assets, liabilities, profits, and losses. Ratios argon only meaning(prenominal) when comp ard with early(a) information. Since they are often compared with application data, ratios help managers understand their companys performance relative to that of competitors and are often used to trace performance over time.Ratio analysis feces reveal much about a company and its operations. However, thither are several points to keep in mind about ratios. Firs t, a ratio is just one number divided by another. Financial ratios are only "flags" indicating areas of strength or weakness. genius or rase several ratios might be misleading, but when combined with other knowledge of a companys management and economic circumstances, ratio analysis can order much about a corporation. Second, there is no single even out value for a ratio. The observation that the value of a particular ratio is too high, too low, or just right depends on the position of the analyst and on the companys competitive strategy. Third, a financial ratio is meaningful only when it is compared with some standard, such as an industry trend, ratio trend, a ratio trend for the specific company being analyzed, or a stated management objective.In trend analysis, ratios are compared over time, typically years. Year-to-year comparisons can highlight trends and point up the need for action. Trend analysis whole kit and boodle best with three to five years of ratios.The second type of ratio analysis, cross-sectional analysis, compares the ratios of two or more companies in similar lines of business. One of the almost popular forms of cross-sectional analysis compares a companys ratios to industry fairishs. These averages are developed by statistical services and trade associations and are updated annually. close to of these citations will be covered later in this guide.Financial ratios can to a fault give mixed signals about a companys fina... ...h ratio is also given. farmers calendar of Business and Industrial Financial Ratios. Leo Troy. Englewood Cliffs, NJ Prentice-Hall, Inc. Annual. (REF HF 5681 .R25 T7)The source of all data are tax returns filed with the U.S. Internal Revenue Service. The most recent edition covers approximately 4.7 million active corporal federal official income tax returns, including those owned or controlled by foreign persons. The publication profiles corporate performance in two analytical tables for each industr y. Table I reports operating and financial information for all corporations, those with and without net income. Table II provides the same information as Table I, but only for corporations with net income. It provides 50 performance indicators for each industry. At the end of each industry section, performance indicators for the last ten years are shown. Data are grouped into 16 categories by size of assets in each industry. around 180 lines of business are covered.Norms in actual dollars for revenue and great(p) factors such as net receivables, inventories, and total assets are given. It also gives average operating tolls in percent of net sales for cost of operations, pensions and benefits, comp

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