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Using Financial Ratios
Evangeline Hampton
HAS/525
Debra Beazley
May 9, 2014

Using Financial Ratios
Introduction

Suggest the financial ratio that most financial analysts would use to evaluate the financial condition of the company. Provide support for your rationale.

Financial ratios are tools utilized to examine the financial condition and performance of company by financial analyst. Financial analysts look at many different ratios. The most important ratios that are used to analyze the financial health of a company are liquidity and profitability ratios. Financial ratios are important because they allow financial managers to evaluate opportunities. Analysts study a company’s financial statements and are particularly concern with return on investment in the various assets of the company and in the efficiency of asset management. Getting the ratios numbers involves analysis and use of the financial statements of a firm. These statements attempt many things. First, the statements reveal the assets and liabilities of a business firm at a moment in time usually at the end of a year. Analyst can use these statements to compare present ratios with past ratios of the same company by using past statements. Analyst can also use ratios of other firms and compare them with firms of similar industry. Evangeline opinion is the financial analyst first look at profitability ratios, used to measure a company’s ability to generate earnings relative to its expenses and other costs. For most company profitability ratios, larger values relative to its industry or to the same ratio from a previous period are better. Two well-known profitability ratios are return on assets (ROA) and return on equity (ROE). Both gauge a firm’s ability to produce earnings their investments, but they do not denote the same thing. Return on equity (ROE) measures how much…...

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