Financial Ratios: What They MeanIn assessing the significance of various financial data, managers often engage in ratio analysis, the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilities, profits, and losses. Ratios are only meaningful when compared with other information. Since they are often compared with industry data, ratios help managers understand their company's performance relative to that of competitors and are often used to trace performance over time.Ratio analysis can reveal much about a company and its operations. However, there are several points to keep in mind about ratios. First, a ratio is just one number divided by another. Financial ratios are only "flags" indicating areas of strength or weakness. One or even several ratios might be misleading, but when combined with other knowledge of a company's management and economic circumstances, ratio analysis can tell much about a corporation. Second, there is no single correct value for a ratio. The observation that the value of a particular ratio is too high, too low, or just right depends on the perspective of the analyst and on the company's 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 works best with three to five years of ratios.The second type of ratio analysis, cross-sectional analysis, compares the ratios of...

...
RATIOANALYSIS
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratioanalysis can predict future bankruptcy.
Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:
1. Liquidity ratios
2. Capital Structure and Solvency
3. Return On Investment
4. Operating Performance
5. Asset Utilization
6. Market Measures
The ratios measure the short term ability of the company to pay its current short-term liabilities.
1. Liquidity Ratio
Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.
i. Current ratio:
The current ratio is the ratio of current assets to current liabilities
The company have decreasing trend in current ratio...

...1. What are the five major categories of ratios, and what questions do they answer?
* Liquidity: Can we make required payments as they fall due?
* Asset management: Do we have the right amount of assets for the level of sales?
* Debt management: Do we have the right mix of debt and equity?
* Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in NPM, ROE, and ROA?
* Market value: Do investors like what they see as reflected in P/E and M/B ratios?
2. What is the Significance (Importance) of Financial Ratio in Decision Making?
* Ratios facilitate comparison of:
* One company over time
* One company versus other companies
* Ratios are used by:
* Lenders to determine creditworthiness
* Stockholders to estimate future cash flows and risk
* Managers to identify areas of weakness and strength
In Detail:
* For Short term Creditors – The Short term creditors like bankers and suppliers of material can determine the firm’s ability to meet its current obligations with the help of liquidity ratios such as current ratio and quick ratio.
* For Long Term Creditors – The Long term creditors like debenture-holders and financial institution can determine firm’s long term financial strength and survival with the help of leverage or capital structure...

...
RatioAnalysis
Cynthia Nelson
HCS/571
September 2 2013
Joseph Rudd
RatioAnalysis
Financial ratioanalysis is the calculation and comparison of ratios pulled from the information in a company’s financial statements (Cleverly & Song, 2011). The financial report is used by organization to determine the financial health and stability of an organization. The ratiosanalysis data are found on the business Profit and Loss Statement and the balance sheet (Loth, 2013). These financial documents provide data for a specific time usually fiscal year (Cleverly & Song, 2011). The ratios are then obtained through formula divided into categories that address the different focus areas of management (Suarez & Lesneski, 2011). The company WW Enterprises uses the four major areas Liquidity, Solvency, Profitability; and Efficiency that measure how well the organization is using its resources (Loth, 2013).
Liquidity ratio is a quick look at organizations ability to meet current financial obligations (Staff, 2013). The Liquidity ratio data for WW Enterprise includes the current ratio, the quick ratio and the operating cash flow ratio (Loth, 2013)
LIQUIDITY RATIOS.
Current Assets/Current Liabilities
=52,100/30834=1.725(1.73)
The ratio results...

...C. OVERALL ANALYSIS OF ALL COMPANIES
LIQUIDITY: CURRENT RATIO
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. From the table it shows that Ajinomoto (M) Berhad is the highest liquidity. The ratio is 5.38, followed by Padini Holding Berhad at 2.37 and 3rd British American Tobacco with ratio at 1.91. Therefore, we can see that Ajinomoto has enough resources to pay its debt over the next 12 months.
LEVERAGE : DEBT RATIO
Debt ratio is a financial ratio that indicates the percentage of a company‘s assets that are provided via debt. Among the 6 companies, it shows that British American Tobacco has the highest debt ratio at 68.75%, followed by Nestle (M) Berhad with debt ratio at 66.88 and Maxis Berhad at 52.4%. It so called the higher the ratio, the greater risk will be associated with firm’s operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firms’ s financial flexibility.
PROFITABILITY : NET PROFIT ON SALES, RETURN ON TOTAL ASSETS, RETURN ON EQUITY AND EARNING PER SHARE
NET PROFIT ON SALES
Net profit ratio is the ratio of net profit (after taxes) to net sales. It is...

...FINANCIAL ACCOUNTING IV
RATIOANALYSIS OF FML UN-AUDITED ACCOUNTS OF 2010 AND 2011
Name Index No Programme
1. Osumanu-Sulemana Amidu BBAA/ET/123001 Accounting
2. Emmanuel Addae BBAA/ET/ 117726 Accounting
3. Benedicta Mawunu BBAA/ET/121614 Accounting
4. Daniel Kwesi Derry 1011003571 Accounting
SUPERVISOR: William Kofi Offei-Mensah (OFF-MENS)
JUNE, 2014
From: Group 1 Members
To: William Kofi Offei-Mensah (Off-Mens)
Subject: Evaluation Of Fan Milk Ghana Ltd’s Un-Audited Financial Statement for the Years Ended, 31st December, 2010 and 2011.
Date::2nd June, 2012
==========================================================================
INTRODUCTION
The objective of this report is to present to you the evaluation of financial performance of Fan Milk Ghana Ltd for the years ended 31 December 2010 and 2011. The data used in this report is the un-audited financial report of Fan Milk Ghana Ltd for 2011 financial report.
Please, find the attached “appendix” for the quantitative analysis of the figures used in this report.
1. COMMENTS ON THE RATIO’S
1.0 LIQUIDITY RATIO: This measures the firm’s ability to pay its bills or debt over the...

...AJ Davidson
Professor Arvi
Finance 311: 9:30-10:45
10/28/14
Financial RatioAnalysis: Honda Motor Company
This is a financial analysis of Honda Motor Company from the year 2011-2014. I will be reviewing and analyzing the company standardized balance sheet, standardized income statement, Ratioanalysis, and their standings among competitors. I will define and compare the information in order to report my findings in an accurate way.
When looking at the ratioanalysis for the company the return on assets which measures profit per dollar of assets has fluctuated over the last three years. In 2011 it was at its highest ROA of 4.62% fell drastically to 1.8% and 2012 then recovered and is now sitting at 4% again this year (3.67% to be exact). The return on equity which is how much profit shareholders generate for every dollar of equity was actually at its highest point in 2011 with an ROE 0f 12.2% then dropped off the next two years and has just recently came back up to 10.5% this year. This shows that the previous two years may have been a rough patch for the company as far as overall sales. Something that stands out about Honda is that the ROE exceeds the ROA in all three years of operation which reflects the company’s use of financial leverage. When looking at the Total Debt ratio for Honda the debt ratio has slightly increased every year since...

...the year-end fiscal date (millions) 742.90 742.60 744.80
Market Capitalization (million $) 19,270.83 27,691.55 37,768.81
From financial ratioanalysis of fiscal year 2012, based on the company’s performance, its profitability is almost the same as it was last year. Its operating margin is slightly increased while its net profit margin is decreased a little from fiscal year 2011. Its net revenues are in the growth stage, which causes the cost of sales to rise as well. The cost of sales is also increased because of the increase in leasehold improvements, which affects the depreciation expense related to production and distribution facilities included in cost of sales to increase (United States). Its net revenues also cause income taxes to increase. In 2012, the income tax is higher than in the fiscal year 2011 because the firm has a tax benefit related to the acquisition of the ownership interest in Switzerland and Austria (United States).
SBUX’s liquidity is increasing over time. Current ratio has increased from 1.8282 times in 2011 to 1.9004 times in 2012. Its financial leverage, from total debt to total assets ratio, is declining because of the increase in retained earnings. This means that the company grows internally. Its decreasing total debt to total assets ratio is consistent with its increasing interest coverage ratio. The company has its interest obligation covered...

...RatioAnalysis Paper
Ratios describe the various relationships among accounts in the balance sheet and income statement. Financial ratios are important and helpful gauges of how an organization is functioning. An organization’s financial health, potential revenue, and even possible bankruptcy can be garnered from financial ratios. Information derived from financial statements is used to calculate mostratios and make projections. “Ratios help investors and lenders determine the risk associated with lending or investing funds in an organization” (GE Financial Healthcare Services, 2003, para 1). According to Finkler and Ward (2006), “the key to interpretation of ratios is benchmarks. Without a basis for comparison, it is impossible to reasonably interpret the meaning of a ratio” (p. 110). Ratios are particularly significant to an organization’s Board or Chief Financial Officer because they reflect the financial shape of the organization to outsiders while allowing comparisons to be made among similar entities in the same industry.
Many businesses and nonprofit organizations use financial ratios. They are well known financial instruments. Even though there are many ratios available for use, the majority of nonprofit organizations use a small number of ratios to learn more...