Acct 611, financial report project, winter 2017 page 1 of 7
When evaluating the relative financial health of two organizations, it is important to use analytical techniques such as ratio analysis in order to gain a better understanding of how they are performing. This includes looking at metrics such as their current ratio which provides insight into their liquidity levels; or return on assets which gives an indication about how effectively management is using available resources. Additionally; debt ratios can also be used to determine whether or not companies have taken on too much risk while profitability indicators help assess whether profits are being made.
Based on these ratios, it appears that one organization has higher current and debt ratios when compared to the other; indicating they may be more liquid and have less liabilities respectively. Furthermore the second company has earned slightly lower returns than its counterpart although this could simply be due differences in total assets between them.
Overall by analyzing both organizations based on these financial metrics its possible to gain a clearer picture about their relative performance levels; offering further insight into which one may prove more appealing for potential investors moving forward.