Financial Statement Analysis

Financial Statement Analysis

Germaine Jamerson

Travis Taylor

Tricia Jones

Enrique Zaragoza

Robert Cruz

ACC/561

June 09, 2016

Neil de Pascal, Instructor

Introduction

        Companies have four main Financial Statements: Balance Sheet, Income Statement, Statement of Shareholder's Equity and a Statement of Cash Flows.  Ratios are used to evaluate if companies overall performance.  Profitability ratio tells us the ability of an organization to make a Profit.  Liquidity ratio describes whether the company is able to pay off all its liabilities when they become due. Solvency ratio measures the ability of an organization to pay long term commitments, such a bondholders and banks.

Ratios

        Profitability ratio tells us the ability of an organization to make a Profit.  The most important profitability ratios are Return on Assets (ROA), Gross Profit Margin (GPM), Operating Margin (OM), Return on Equity (ROE), Return on Sales (ROS) and Return on Investment (ROI).

        Liquidity ratio describes whether the company is able to pay off all its liabilities when they become due.  It not only measures the cash a company has, but how quickly they convert assets into cash.  Some liquidity ratios are Quick Ratio, Acid Test ratio, Current Ratio and Working Capital Ratio.

        Solvency ratio measures the ability of an organization to pay long term commitments, such a bondholders and banks.  Solvency ratios are Debt to Equity Ratios, Debt Ratio and Equity Ratio.

Financial Statement Information

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