Interpreting Financial Analysis

Interpreting Financial Analysis

Introduction

For making a business sustainable and also make it easier to get the knowledge of its dynamic, financial ratios is one of the most efficient tools. Financial ratios indicate some of the really important in-depth understanding which makes it easier for the interpreter to get a better know-how that what is these movements actually indicating (Brigham & Ehrhardt, 2009).

This paper is going through financial ratios of ABC SDN. BHD. The company's financial statements are used in order to calculate these ratios. Ratios which are calculated are the key financial indicators which are going to be a useful source of getting the idea that in what manner the company can make efficient use of the given resources.

Discussion

Ratios which are calculated in this paper are liquidity, leverage and profitability ratios. Current ratio is a liquidity measure which shows the ability of a firm to meet its immediate debts. Here the values for this ratio are showing that in the year 2009 ABC SDN. BHD was in a more feasible situation and was able to meet its immediate obligations in a much better way than the year 2010. There is a decrease of 0.36 which is a substantial decrease.

The other ratios are the leverage measures. Debt to asset and debt to equity are calculated in this part. Debt to Asset in the year 2009 is 0.56045 and it has increased in the year 2010 and is than on 0.654273. The increase is showing that in the year 2010, ABC SDN. BHD is depending on debts rather than assets in a much more proportion. This is not a very feasible thing to be found and shows that the company is now more dependent on the external debts which make it riskier for the company to prevent bankruptcy.

On the other ...