FIN/571

Interpreting Financial Results

When analyzing a business, financial statements provide a detailed look into the company and the success or failure which lies within in. Financial ratios are calculated to determine these numbers and to identify other number related variables that have an impact on the company and those investing in the business. Once determined they offer information concerning the businesses return on investment and the ability of the business to pay its bills on time, as well as what their projected future earnings will be. The following depicts the financial status of ABC SDN. BHD with financial ratio analysis.

Financial Ratio Calculations

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BHD Calculation:

-0.018% = $1,881,000/ ($32,175,990 - $32,209,990) $-34,000

Explanation: A return on investment ratio measures the businesses gain in comparison to cost and determines if it is headed in a favorable financial position. ABC SDN. BHD has a ROI of -0.18% currently, which as it is does not appear to be favorable for the firm.

Current Ratio

Calculation:

Current Ratio = Current Assets/ Current Liabilities

ABC SDN. BHD Calculation:

1.43% = $29,307,990/ $20,539,890

Explanation: A current ratio is calculated in order to measure whether or not a company can successfully pay short term debt obligations. With a current ratio of 1.43%, ABC SDN.BHD has a healthy current ratio.

Assets Turnover Ratios

Total Asset Turnover

Calculation:

Total Asset Turnover = Net Sales/ Total Assets

ABC SDN.BHD Calculation:

3.78% = $121,777,000 /$32,175,990

Explanation: Asset turnover determines how much a company sells for each dollar worth of assets they own. ABC SDN.BHD has a total asset turnover ratio of 3.78%, which means they are selling 3.78% for every dollar’s worth of assets they own.

Fixed Asset