Projecting your Profits and Losses

Please make sure you have had sufficient review time in the Learning Activity this week in order to better understand the concepts you will use in both this Discussion and in the Assignment.

What questions do financial ratios help answer about a firm’s financial performance? What ratios might be of more interest to certain stakeholders and why?

Can you make response each posted below # 1 to 3?

1. From: Debra Clendenin posted Jun 16, 2018 1:15 AM

Many people think that ratios only help those looking to invest in businesses, which is not the case. Certain ratios can help you determine a lot about your business. All the information you need can be found in the financial statements. Some basic ratios that could help lead any business are working capital(showing how quickly assets can be liquidity), quick ratio(how well current liabilities can be covered by cash assets and those with ready cash value), and debt-equity ratio(all debt divided by equity). All of these ratios gives different information and alone are not really of any use. Ratios give the most when compared with other numbers like industry norm or the companies past ratios.

2. From: Wesley Turner posted Jun 14, 2018 5:59 PM

Financial Ratios is a way to measure your business financial status. When it comes to a business, numbers don't lie. This is a way to check your business status to make sure it is profitable. Financial ratios also lets the investors know if the business is sinking or rising financially.

3. From: Rebecca Holmes posted Jun 14, 2018 12:34 PM

Financial ratios are useful gauges of a company’s performance and financial health. Ratios can answer questions about the liquidity of a company’s assets, whether a company is getting good returns on its assets and equity, and how the business is financed. (financial leverage) (Longnecker, et al, 2014, p,282). Financial ratios can provide additional significance when the ratios are compared to either previous financial performance of the company itself, or to the financial performance of other companies similar to itself.

Ratios are important to investors to gain useful insight to the financial health and profitability of a company. Investors find particular interest in the debt ratio and the return on equity ratio because these tell investors how the firm is funded. This is important in evaluating risk that is developing from the use of financing and the return on investment that investors are receiving.