This paper, the second in a two part series, continues to explain how to interpret and understand financial information. It deals with measures of liquidity, solvency and fund flows and describes how to establish standards agamst which a company's financial ratios can be compared.Richard G. P...
Investment duration:The time horizon of an investment plays a significant role in determining what qualifies as a good ROI. Longer-term investments typically require higher ROIs to justify tying up capital for an extended period. Shorter-term investments may offer lower ROIs but provide liquidity and...
Article Sources Part of the Series Guide to Financial Ratios Overview of Financial Ratios Profitability Ratios Liquidity Ratios Solvency Ratios Valuation Ratios
Also, the DIR provides analysts with a number of days, rather than a ratio of the company’s assets to liabilities. This makes it easier to interpret as a measure of liquidity. Knowing that a company can remain liquid for “X” number of days without tapping into its long-term assets is...
They should be able to interpret financial statements, analyze financial ratios, and assess the quality and accuracy of financial data. Knowledge of accounting methodologies, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), is valuable. ...
However, the net debt metric should not be used alone to determine a company’s financial health. It should be used in conjunction with other liquidity and leverage ratios such as the current ratio, quick ratio, debt ratio, debt-equity ratio, etc. ...
Liquidity and solvency ratios Why Is Performance Reporting Important? Understanding business performance against goals and objectives is the key to running a successful business. Businesses must continuously assess and report their targets, goals, and objectives and make necessary adjustments. To boost busi...
One advantage of the ROA calculation is the ease with which investors can interpret results. Following the example above, the ROA is equal to 6.7 percent. This tells the analyst or investor that management can make .067 cents on every dollar of assets invested with the company. The higher th...
risk of the fund/portfolio relative to that of a benchmark (e.g., a specific market or index). It has taken its share of inspiration from the widely accepted Sharpe Ratio; however, it has the significant advantage of being in units of percent return, which makes it easier to interpret....
the D/E ratio the most because the numbers involved tend to be larger than forshort-term debtand short-term assets.If investors want to evaluate a company’s short-term leverage and its ability to meet debt obligations that must be paid over a year or less, they can use other ratios. ...