Ratio and Financial Statement Analysis
RAOUL MUYENZI
Financial Decision Making for Managers
Spring 2011-2012
Ratio and Financial Statement Analysis
Benefits and Limitations.
Executive Summary
This paper analyzes tools used in financial analysis such as ratios. Financial ratio analysis is a judicious way for different stakeholders to use for different goals.
This paper demonstrates that financial ratio analysis is an important instrument to estimate resources and their used. It also demonstrates that despite the fact that financial ratio analysis is an excellent tool, it does have constraints. In fact, we will examine financial ratio by analyzing they limitations and they benefits.
References used in this paper are from books and journal in a scholarly journal. Presentation of the data and the methodology used are objective; they are supported by cases.
Is it possible to estimate or evaluate a company’s present and future performance? The answer is yes, but you need tools and learn how to use them. Financial ratio analysis is an excellent tool for companies to evaluate their financial health in order to identify feebleness so as to institute corrective measures. Financial ratios are first and foremost manager’s concern because they want to determine what divisions have performed well. It is as well stockholders’ concern because they want to know the value of their stock. Financial ratio is used by creditor to determine whether they will receive the money the loaned to the firm (Parrino, Kindwell, & Bates, 2011).
“Financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in” (Financial Analysis, Investopedia). The purpose of financial statement analysis is to help users in predicting the future. In other words, ratios are highly important profit tools that help to implement plans
Financial Decision Making for Managers
Spring 2011-2012
Ratio and Financial Statement Analysis
Benefits and Limitations.
Executive Summary
This paper analyzes tools used in financial analysis such as ratios. Financial ratio analysis is a judicious way for different stakeholders to use for different goals.
This paper demonstrates that financial ratio analysis is an important instrument to estimate resources and their used. It also demonstrates that despite the fact that financial ratio analysis is an excellent tool, it does have constraints. In fact, we will examine financial ratio by analyzing they limitations and they benefits.
References used in this paper are from books and journal in a scholarly journal. Presentation of the data and the methodology used are objective; they are supported by cases.
Is it possible to estimate or evaluate a company’s present and future performance? The answer is yes, but you need tools and learn how to use them. Financial ratio analysis is an excellent tool for companies to evaluate their financial health in order to identify feebleness so as to institute corrective measures. Financial ratios are first and foremost manager’s concern because they want to determine what divisions have performed well. It is as well stockholders’ concern because they want to know the value of their stock. Financial ratio is used by creditor to determine whether they will receive the money the loaned to the firm (Parrino, Kindwell, & Bates, 2011).
“Financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in” (Financial Analysis, Investopedia). The purpose of financial statement analysis is to help users in predicting the future. In other words, ratios are highly important profit tools that help to implement plans
References: “Ratios are only as good as the data upon which they are based and the information with which they are compared.” (Kieso, Weygandt, Warfield, 2010) Thus, ratios analysis present some disadvantages.