Financial Analysis: Financial Statement Ratios and Metrics

In: Business and Management

Submitted By annie91945
Words 1240
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Applied Managerial Finance
Financial Analysis: Financial Statement Ratios and Metrics
November 30, 2013

Financial Analysis: Financial Statement Ratios and Metrics

Mary has asked me to provide a list of financial ratios that she needs explained and a computation of each for Apex Printing. She would also like to see a comparison of these ratios to other firms in the printing sector. I am going to provide an indication of how each of these ratios differ from Apex’s and whether or not the ratio is indicative of better performance by Apex (Task List, 2013).
Financial ratios are used to look at how an organization performs and what kind of financial situation they may be in. Information that is provided in the financial statement is used to calculate these ratios. Ratios show trends and as comparisons to other organizations. They also have the capability to predict bankruptcy. There are several different types of ratios used according to the particular type of information they want to provide. These are liquidity, asset turnover, financial leverage, profitability and dividend policy ratios (NetMBA, n.d.).
Explain and compute Current ratio of Apex
Short-term financial obligations can be seen in the liquidity ratio. Short-term creditors use this information to determine whether or not to extend credit to an organization. Current ratio and the quick ratio are the most frequently used ratios in this area (NetMBA, n.d.). As one of the most popular ratios used to compute a company’s liquidity, the current ratio determines the amount of current assets that are available to cover their current liabilities (Loth, n.d.). The equation to compute the current ratio for Apex can be seen as: Working capital =20,450-18,100 for a total of 2,350 in working capital for the current year. Unfortunately the current ratio may include items that cannot be liquidated quickly or be of…...

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