Asset management ratios Market value ratios Debt management ratios Liquidity ratios
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- Calculate the firm’s Liquidity Ratios (Current Ratio and Quick Ratio), Profitability Ratios (for Net Income as well as EBIT), Efficiency (Total Assets Turnover, as well as A/C Receivables Turnover and Days in Accounts Receivables, Inventory Turnover Ratio and Days in Inventory), Debt Usage (Debt to Equity and Coverage Ratio), and Market-Value Based Ratios. For some ratios you can calculate only one value (for example, Profitability or Interest Coverage), and for some ratios you can calculate two values (one at the beginning and the other at the end of the year). Explain all calculations.Answer the following question in essay. What do you understand by current ratio? What are it uses? What are its limitations? Ratio analysis is widely used as a tool of financial analysis, yet it suffers from various limitations. Explain. How can solvency of a firm be measured? What you understand by Liquidity ratios? Discuss their significance. Page 1 Module PSFM08 MANAGERIAL ACOUNTING WITH FINANCIAL ANALYSIS AND REPORTING Explain the importance of profitability ratio. How they are worked out?Discuss how a financial manager can use ‘current ratio’ and ‘debt ratio’ in ratio analysis to better manage a firm.
- Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the probability of whether the company will face problems in operations. b. They show the profitability of the company over a specific period of time. c. They show the relative proportion of debt items with respect to shareholders' equity or total capital. d. They show the relative levels of liquid assets of the company. According to the information given in the table below, which of the following is Raw materials consumed? Opening Stock Raw Materials 32300 Purchases 128800 Freight in 4950 Sales return 2350 Wages paid to labor 78900 Closing Stock Raw Materials 28400 Select one: a. 135300 b. 149900 c. 143700 d. 137650 d. Current ratioWhich of the following is NOT correct about the financial ratios? Select one:a. Financial ratios are based on the estimated values of balance sheet and income statement accounts.b. Financial ratios can be viewed as equalizers, allowing for relative comparisons to be made. c. Financial ratios are one of an analyst’s most powerful tools, converting financial statement information into a form that is easier to analyze.d. The examination of financial ratios provides insights into how a firm has performed historically and how it is performing relative to its competitors and its industry.You have been asked by your CEO to evaluate, analyse and calculate commonly used ratios relating to a company’s profitability, liquidity, solvency and management efficiency. Requirement: b. Explain how do analysts use ratios to analyse a firm’s leverage? Which ratios convey more important information to a credit analyst those revolving around the levels of indebtedness or those measuring the ability to service debt? What is the relationship between a firm’s level of indebtedness and risk? What must happen in order for an increase in leverage to be successful? Discuss and illustrate all your answer.
- Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: O a. They show the relative proportion of debt items with respect to shareholders' equity or total capital. b. They show the profitability of the company over a specific period of time. c. They show the probability of whether the company will face problems in operations. O d. They show the relative levels of liquid assets of the company.The DuPont equation shows the relationships among asset management, debt management, and ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is: Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers. factors also need to be considered. Quantitative Problem: Rosnan Industries' 2022 and 2021 balance sheets and income statements are shown below. Balance Sheets 2022 2021 Assets Cash and equivalents $ 70 $ 55 Accounts receivable 275 300 Inventories 375 350 Total current assets $ 720 $ 705 Net plant and equipment 2,000 1,490 Total assets $ 2,720 $ 2,195 Liabilities and Equity Accounts payable $ 150 $ 85 Accruals 75 50…Ratio is an expression of relationship between two or more items in mathematical terms. Ratio may be expressed as a:b (a is to b), in terms of simple fraction, integer, or percentage. Critically discuss. A Finance Manager can utilize financial ratios and completely analyze any firm's financial performance without the need for any further financial review via any other company's data. Critically discuss.
- Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the relative levels of liquid assets of the company. b. They show the relative proportion of debt items with respect to shareholders' equity or total capital. c. They show the profitability of the company over a specific period of time. d. They show the probability of whether the company will face problems in operations.In the Du Pont method of analysis the two key drivers of return on equity are: a) Profit margin and return on assets b) Return on assets and the financing plan c) Profit margin and the financing plan In trying to measure a company's effectiveness in earning an adequate return on sales we would use which groups of ratios? a) Profitability ratios b) Asset utilization ratios c) Liquidity ratiosWhat is the purpose of a financial ratio analysis? Define a financial ratio for each of the following: Liquidity Ratios Leverage Ratios Activity Ratios Profitability Ratios Growth Ratio Which do you think is/are most important to a company like walmart in making financial strategic decisions? Why?