Importance of Financial Analysis - 692 Words

Financial analysis is an important aspect in maintaining a successful business. Analysis, when done properly allows a company to better pinpoint problem aspects of the business. The company can then take corrective action to alleviate or mitigate the problem aspects of the business. Aspects such as return on assets, return on equity, net income, and the quick ratio are all aspects needed to help the business function properly. Depending on the nature of the business, each metric will vary in its importance. For example, a highly capital intensive business relying on large amounts of fixed assets, may want to know the return they are getting from those assets. Likewise, a startup firm would be very interesting in its ability to pay off current debts in a timely and orderly fashion. As such the quick ration will take priority. In regards to running and maintaining a business however, I believe the three most important financial analysis tools are return on assets, profit margins, and c urrent assets. Financial computations from the finance office will allow investors to ascertain the actual position of the business. One of the most widely financial computations used is that of ROA. It is a strong profitability ratio because of its relation to both the profit margin and asset turnover. ROA helps show how well the company controls its costs and how efficient they are in utilizing their resources. For example an ROA of .44 indicates that the company is receiving $.44 for everyShow MoreRelatedThe Importance Of Financial Analysis1671 Words   |  7 PagesIt is important to develop unique visitors that visit our site. Not only will we need to attract them to the site, but we should be trying to get them to spend more time on the site and direct them to make contact with one or more providers. The importance of this can be seen in bounce rates, as mentioned earlier. It’s not just about the number of visitors, but the number that become actively involved in the content. The final and most important success factor is conversions. In order for providersRead MoreThe Importance Of Financial Analysis1000 Words   |  4 PagesThe financial analysis has been done and on the basis of NPV and IRR projections we accept the project because NPV is positive at 15% nominal rate of return and the IRR is 64% without Anna’s concerns and IRR is 51% with regard to her concerns. So, we accept the project because in both the situations, the project seems acceptable and profitable. Annual Net present value with IRR or not in sheet 1 is positive, which shows that it is a good idea to continue the project due to the net cash flows areRead MoreEvaluation Of Financial Position And Performance Of Uk Banking Sector1163 Words   |  5 PagesEvaluation of Financial Position and Performance of UK Banking Sector with Respect to Liquidity and Profitability Research Background: Several research studies have done not only about the importance of performance evaluation (financial and non financial) of banks but also for the impact of analysis to the economy and various stakeholder groups. Generally the financial performance of banks and other financial institutions has been measured using a combination of financial ratio analysis, measuring performanceRead MoreHeading : Fundamental Analysis And Analysis Essay772 Words   |  4 PagesHeading: Fundamental Analysis URL: http://www.avatrade.com/resources/fundamental-analysis Content Additions/Changes †¢ Add a â€Å"Softer† introduction; include statement that addresses AvaTrade, along with referring to the nature of the following â€Å"Guide†. †¢ Add {Fundamental Analysis Defined}, use â€Å"When doing fundamental analysis, a trader studies the overall state of the economy†¦Ã¢â‚¬  paragraph as a lead-in. †¢ Change â€Å"Why do Fundamental Analysis† to â€Å"Why conduct Fundamental Analysis† †¢ â€Å"Some of the world’sRead MoreUses Of Financial Statements : A Profit And Loss Account959 Words   |  4 PagesUses of Financial Statements Income Statements Also referred to as a Profit and Loss (PL) statement, income statements illustrate a company’s revenues and expense, operating and non-operating income and expense, which is generated and incurred within an accounting period. â€Å"The analysis of income can create a picture of the quality of operations in the composed profit and loss account period† (Jeletic, 2012, pg. 325). In addition, income statements also inform external users of net profits or lossesRead MoreFinancial Statement Analysis-Questions (1)1087 Words   |  5 Pages------------------------------------------------- BBA 4201: Financial Statement Analysis amp; Control 1. Describe some of the analytical uses to which financial statement analysis can be put. 2. What are the sources of financial information? 3. Who are the users of financial statements? 4. What are the objectives of financial statements? 5. What are the limitations of financial statement analysis? 6. Discuss the need for comparative analysis. 7. Identify the tools of financial statement analysis. 8. Explain andRead MoreFinancial Statement Analysis-Questions (1)1097 Words   |  5 Pages------------------------------------------------- BBA 4201: Financial Statement Analysis amp; Control 1. Describe some of the analytical uses to which financial statement analysis can be put. 2. What are the sources of financial information? 3. Who are the users of financial statements? 4. What are the objectives of financial statements? 5. What are the limitations of financial statement analysis? 6. Discuss the need for comparative analysis. 7. Identify the tools of financial statement analysis. 8. ExplainRead MoreRole of Financial Statements in Decision Making1634 Words   |  7 PagesTOPIC: ASESSMENT OF CREDIT RISK IN FINANCIAL MANAGEMENT THE ABSTRACT This proposal study explores financial credit risk assessment. This is an important issue because there is currently no standardized method used by financial institutions for the assessment of credit risk. There are needs for a critical evaluation of the most popular credit risk assessment methods such as the judgmental method, credit-scoring and portfolio models along with limitations used. Survey interview process is neededRead MoreThe Matching Concept of Smith Company667 Words   |  3 Pagesexpense $24,350 Insurance $1,400 Marketing $4,500 Property taxes $8,900 Rent $18,000 Salaries $67,500 Utilities $6,700 $131,350 N/P ($4,850) Workings C.O.G.S $234,000 Add back closing stock $45,500 $279,500 The Matching Concept: Its Importance The matching principle in the words of Nikolai, Bazley and Jones (2009) states that to determine the income of a company for an accounting period, the company computes the total expenses involved in obtaining the revenues of the period and relatesRead MoreFinancial Issues Affecting Kenyatta Market Women Entrepreneurs Of Nairobi962 Words   |  4 PagesFINANCIAL ISSUES AFFECTING KENYATTA MARKET WOMEN ENTREPRENEURS OF NAIROBI, KENYA 1. Introduction i. Background Information According to Creighton Yieke (2006), women in Kenya constitute a subordinate, disadvantaged and muted group who are routinely treated as inferior and who face coerced sex, harmful cultural practices, stigma and discrimination. Their inferior legal status in relation to marriage inheritance, guardianship, property ownership, places them in disadvantaged position economically