Essay on Ratio Analysis

Submitted By hellebaby4
Words: 607
Pages: 3

Ratio Analysis April Helle HCS/571 Professor Shawishi Haynes September 23, 2013

Organizations all have budgets with these budgets they must have ratios to analyze. In this paper ratio analysis will be discussed. Two ratios will be named from each major group from the financial group selected. Examples will be selected with calculations and evaluations of the meaning of the results related to the financial health of the organization. Factors will be discussed that affect the outcome of the calculations.

Ratios There are several different ratios used in an organizations finances. The first type is liquidity ratios they measure a firm's knack to meet its current duties. The next ratio is the profitability, this ratio measures management's capacity to regulate expenses and to earn a return on the resources committed to the business. Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time. These are examples and definitions of the explaining the deference between these ratios and what they are used for.
Selected facility financial record This facilities total current assets are 40,979. The facilities capital assets are 16,735. Total assets are 60,384. I chose example two due to not having access to my organization’s financial records. The total current liabilities 2,333.
The total net assets are 58,051. The total operating venue is 46,715. The total operating expenses is 42,872. The total non- operating revenues, expenses, and gains are 3,595. The company’s net assets at the beginning of the year are 50,620. The end of the year’s net assets are 58,051. Asset turnover ratio The formula for the ratio is asset turnover = total revenue/ average assets for period. 0.68 = 60384/40979 this is an example of an asset turnover ratio. The asset turnover ratio calculates the total revenue for every dollar of assets a company owns. This ratio estimates that for every 0.68 a dollar will be earned. This ratio gives a great idea of what profit the company will make. Working capital ratio The formula for this ratio is the current assets – the current liabilities. 40,979 – 2,333 equals to the working capital ratio. The total working capital ratio is 38,646. Working capital compares current assets to current liabilities, and serves as the liquid reserve available to satisfy