QuickHelper

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Teaching Since: May 2017
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  • MBA, PHD
    Phoniex
    Jul-2007 - Jun-2012

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  • Corportae Manager
    ChevronTexaco Corporation
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Category > Business & Finance Posted 25 May 2017 My Price 12.00

ACCOUNTING/Financial Analysis

Question description

 

The firm's financial statements—its balance sheet, income statement, and statement of cash flows—form the basis for financial analyses performed by accountants inside and outside the firm. Information that comes from these statements is highlighted in figure 17.9 in your textbook. Use that diagram to determine which information is needed to complete the analysis below.

Ratio analysisis the assessment of a firm's financial condition, using calculations and financial ratios developed from the firm's financial statements. Financial ratios are especially useful in comparing the company's performance to its financial objectives and to the performance of other firms in its industry.

Using your company’s (Royal Dutch) current balance sheet, income statement, and statement of cash flows, use ratios to assess the company’s financial condition.

  1. The current ratio is the ratio of a firm's current assets to its current liabilities. This information appears on the firm's balance sheet.

Current ratio = Current assets/Current liabilities.

What question does this ratio answer?

  1. Leverage (debt) ratios measure the degree to which a firm relies on borrowed funds in its operations. A firm that takes on too much debt could experience problems repaying lenders or meeting promises made to stockholders.

Calculate your company’s (Royal Dutch) debt to owners’ equity ratio

Debit to owner’s equity ratio = Total liabilities/Owner’s equity.

What does this calculation tell you about the company’s (Royal Dutch) dependence on borrowed funds?

3. Profitability (performance) ratios measure how effectively a firm's managers are using its various resources to achieve profits. Three of the more important ratios are earnings per share (EPS), return on sales, and return on equity.

Calculate and evaluate your company’s (Royal Dutch) return on sales.

4. Using these three ratios, how would you evaluate your company’s (Royal Dutch) financial position? Be specific and make sure your answer is based upon the ratios you calculated.

Answers

QuickHelper
(10)
Status NEW Posted 25 May 2017 04:05 AM My Price 12.00

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