Accounting 460 Financial Ratios Accounting, Finance, SPSS Essay
Assume a role in a company (e.g., chief financial officer [CFO] or capital market analyst) or as an outside potential investor, and using the financial statements from Unit 1, complete the following:
Perform 2 different types of ratio analysis.
Which type of ratio is best suited for your chosen position?
Show the equations for each of your ratios, and explain why you chose them.
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Financial Ratios
Name
Course
Institutional affiliation
The type of ratios best suited for the role of chief financial officer (CFO) is the current ratio (Current Ratio = Current Assets ÷ Current Liabilities) as a key performance indicator due to the fact that the company’s growth and expansion solely depends on the firm’s ability to meet its financial obligations as and when they are due. A good example can be drawn from Jim’s balance sheet as shown below:-
Current Ratio = Current Assets
Current Liabilities
= 180, 500
11, 500
= 15.70 (This means that Jim’s business is not properly managing its working capital)
It is the duty of the CFO to ensure that the company is a...
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