Financial Statement Analysis

Introduction

The use of financial ratios is very common in accounting and finance processes. These ratios are used for the evaluation of a business's performance, as well as for identifying potential problems. Each ratio is used to inform about various factors like the solvency, earning power, and debt load of the business. These ratios measure the relationship arising between two or more modules of the financial statements and pose a greater meaning if the results are compared to industry standards of businesses with the same size and activity.

There are various types of ratios including return or profitability ratios, which offer information regarding the management’s performance in the usage of resources. The other ratio example is the liquidity ratio, which is used to demonstrate the business's ability to pay its present obligations. This measures in short and long-term views. The other ratio is leverage, which examines the extent to which a company has depended on borrowing so that it can finance its operations.

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The other ratio is the efficiency ratio, which assesses the firm’s credit use, assets, and inventory (Libby, Libby, & Short, 2011).

Identifying the company using the exhibits

1 IT service provider

2 Retail grocery stores

3 Commercial airlines

4 Pharmaceutical preparations

5 Liquor producer and distributor

6 Mobile Phone service Providers

7 Semiconductor manufacturers

8 Computer software

9 Commercial banking

10 integrated Oil and gas

Conclusion

The use of ratios is a very important aspect for any firm. It helps in offering information regarding the management performance in the usage of resources, demonstrating the business's ability to pay its present obligations, examining the extent to which a company has depended on borrowing so that it can finance its operations, and assessing the firm's credit use, assets, and inventory.

This makes it possible to rate the company’s success.

References

Libby, R., Libby, P. A., & Short, D. G. (2011). Financial accounting. New York: McGraw-Hill/Irwin.