Assignment 3: calculating financial ratios – vital to any ratio
In addition to providing metrics for measuring current performance, financial ratios such as return on investment (ROI) also help organisations plan ahead by providing concrete evidence for decision making; this helps firms allocate resources appropriately in order to maximise returns over time. Similarly other metrics such as Debt-to-Equity (D/E) ratio or working capital ratio enable companies to keep track of their debt repayment capabilities as well as their liquidity position respectively.
Overall the findings from a financial analysis can tell you a lot about how healthy a company is financially. By having an understanding of how certain areas are performing compared to others businesses can identify potential issues early which will enable them take corrective action before it’s too late; this is particularly important when it comes to evaluating investments that may have long-term implications on overall profitability.