Financial Accounting

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FINANCIAL ACCOUNTING

Financial Accounting



Introduction1

Financial Analysis2

Liquidity Ratios2

Graphical Representation of Liquidity Ratios3

Profitability Ratio3

Graphical Representation of Profitability Ratio4

Market value Ratios4

Graphical Representation of Market value Ratios5

Asset management Ratios5

Graphical Representation of Asset management Ratios6

Debt Management Ratios6

Graphical Representation of Debt Management Ratios7

Conclusion7

References9

Financial Accounting

Introduction

In this paper the financial performance of an organization is being illustrated. The financial ratios are being used as an analytical approach for making the picture much clear. The ratios are which are selected in this paper are selected by keeping in view that the profitability, liquidity, market value and asset management of the organization must be the centre of the interest.

Financial ratio analysis is a very efficient tool when the purpose is to give an overview of any organization much effectively. The evidences which are found in financial ratio analysis are always on the basis of the fact which is revealed through the financial statements. The interpretation of these ratios leads the analyst towards taking a decision on the basis of the fact revealed (www.acornlive.com).

There is a need of effective planning for managing the finance efficiently in any organization. Ratio analysis is used for the similar purpose and it helps in improving the understanding regarding the financial ratios and the trends generated through them. This helps in generating the key indicators and tells that where the organization is moving, with respect to its performance (www.demonstratingvalue.org).

Managers can make a very good use of the results which is got through these ratios, as they pin point all the strengths and weaknesses of the previous strategies. This lead the managers towards taking the decision that what corrective actions they must take. Investors might make use of the ratio analysis for measuring the results and then comparing it with some other organization dealing in the same industry (www.demonstratingvalue.org).

Core objectives of the ratios are identified as a tool for assessing the borrower's credit risk profile. It also provides stipulation regarding all the terms and conditions or the organization. It helps in assessing the utilization of all the credit facilities the organization is having with a proper criteria defined for the granted credit. It also let the manager know that how safe the funds are acquired through banks and how readily they are able to be paid (Alexander, n.d.).

Financial Analysis

In the following part profitability, liquidity, market value and asset management ratios are calculated and interpreted.

Liquidity Ratios

Liquidity Ratio

2012

2011

2010

2009

2008

Current Ratio

1.62133

1.82018

2.14695

1.93439

1.06873

Quick Ratio

1.21904

1.55186

1.76941

1.67783

0.77403

In the table above, liquidity ratios of the organization are illustrated. These ratios are useful for making an understanding that how liquid the organization. A higher value is desirable in case of this ratio. As it tells that the organization is able to fulfill immediate obligations in a better way. If this ratio is reducing than it means that the company is not able to pay its immediate debts in case of bankruptcy (Brigham & Houston, 2007).

Here the current ratio of the organization is in the lowest level when being compared to the figures of three preceding years. On the other hand, the quick ratio is also on the similar ...
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