Financial Performance Analysis

surcharge financial Performance A subjective euphony of how well a firm can use assets from its primary mode of business and submit revenues. This term is also used as a general measure of a firms overall financial health over a wedded period of time, and can be used to comp be similar firms crossways the same industry or to compareindustries or sectors in aggregation. Methods of Financial perfomance abstract proportion Analysis This is the method in which the dimension mingled with two or more variables related to the business is compared. There are many ratios used to analyze financial statements Liquidity Analysis proportionality For example, the dinero working capital ratio is reason mingled with net working capital and tot assets. Profitability Analysis Ratio For example, dispel on assets ratio is calculated between net income and average measure assets. Profit margin ratio is calculated between net income and sales. Earning per portion push through is calcul ated between net income and number of outstanding shares. Activity Analysis Ratio For example, asset turnover ratio is calculated between sales and average total assets. Inventory turnover ratio is calculated between cost of goods sold and average inventories. Capital Structure Analysis Ratio The most important ratio is debt to equity ratio, which is calculated between total liabilities and total stockholders equity. Capital Market Analysis Ratio For example, dividend ratio is calculated between annual dividends per ordinary share and market price of common stock per share. All these ratios are collectively used to carry out the financial abridgment of business to assess growth, profitability, and solvency of a business. Remember that ratio analysis is as important as horizontal and vertical analysis and must not be overlooked.