Ratio

a. Why are proportionalitys useful? What three groups use ratio analysis and for what reasons? Financial ratios are designed to extract pregnant information that might not be obvious scarcely from examining a firms financial tilts. Financial statement analysis involves comparing a firms capital punishment with that of other firms in the same industry and evaluating trend in the firms financial position over time. From the text , we know managers use financial analysis to identify situations needing concern; potential lenders use financial analysis to determine whether a company is realisationworthy; and stockholders use financial analysis to do predict future earnings, dividends, and free cash flow. b. Calculate the 2011 incumbent and quick ratios. Current ratio = Current assets / Current liabilities = 2,680,112 / 1,039,800 = 2.6 alert ratio = (Current assets - Inventories) / Current liabilities = (2,680,112 1,716,480) / 1,039,800 = 0.9 Ratio Analysis ------------------------------------------------- 2009 2010 2011E Industry Average Current 2.3 1.5 2.

6 2.7 restless 0.8 0.5 0.9 1.0 Compared the current and quick ratios from 2009 to 2011 with the industry average, it can be good indicated Computron has a weak liquidity position, especially in 2010. In 2011 it was improved and very close to industry average. We often destine of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis and (3) to stock-holders for stock valuation. These different types of analysts would not have an lucifer interest in the liquidity ratios.... If you want to get a full essay, order it on our website: Ordercustompaper.com

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