The calculate project financial ratios paper | BUS 368 Venture Capital & Banking | Ashford University
When looking at the financial statements of a given company , it is important to calculate certain ratios in order to gain insight into its current state. Firstly, liquidity ratios can be used in order to understand how quickly one can convert their assets into cash . This includes things like the Current Ratio (Current Assets/Current Liabilities) & Quick Ratio (Current Assets – Inventory/ Current Liabilities ).
Additionally , leverage ratios also provide useful information by measuring an organization’s debt in relation to its equity which will allow analysts to assess any risk associated with taking on additional loans. Some examples include Debt-Equity ratio (Total Debt/ Total Equity ) & Interest Coverage Ratio (EBITDA /Interest).
Management Efficiency Ratios are a great way to determine if an organization is utilizing their resources properly while Profitability Ratios measure how much profit they are able generate relative to various investments such as sales or capital. Examples of these include Net Profit Margin(Net Income/Sales) & Return on Equity(Net Income/Shareholder’s Equity).
Overall, by calculating these different types of ratios one can gain deeper understanding about a company’s performance ! Not only does this help identify potential problem areas but it may also uncover new opportunities for growth.