Ratio Analysis Essay Example | Topics and Well Written Essays - 2750 words

Ratio Analysis - Essay Example Financial statement analysis consists of the application of analytical tools and techniques to the data in financial statements in order to derive from them measurements and relationships that are significant and useful for decision making (ICFAI Center for Management Research ICMR, 2004). The process of financial analysis can be described in various ways, depending on the objectives to be obtained. Financial analysis can be used as a preliminary screening tool of future financial conditions and results. It may be used as a forecasting tool of future financial conditions and results. It may be used as a process of evaluation and diagnosis of managerial, operating, or other problem areas. Above all, financial analysis reduces reliance on intuition, guesses and thus narrows the areas of uncertainty that is present in all decision making processes. Financial analysis does not lessen the need for judgment but rather establishes a sound and systematic basis for its rational application. In the analysis of financial statements, the analyst has a variety of tools available from which he can choose those best suited to his specific purpose. The following are the important tools of analysis. Ratios are well known and the most widely used tools of financial analysis. ... The analysis of ratios can disclose relationships as well as bases of comparison that reveal conditions and trends that cannot be detected by going through the individual components of the ratio. The usefulness of ratios is ultimately dependant on their intelligent and skillful interpretation. Ratios are used by different people for various purposes. As ratio analysis mainly helps in valuing the firm in quantitative terms, two groups of people are interested in the valuation of the firm and they are creditors and shareholders. Creditors are again divided into short-term creditors and long-term creditors. Short-term creditors hold obligations that will soon mature and they are concerned with the firm's ability to pay its bills promptly. In the short run, the amount of liquid assets determines the ability clear off current liabilities. These persons are interested in liquidity. Long-term creditors hold bonds or mortgages against the firm and are interested in current payments of interest and eventual repayment of principal. The firm must be sufficiently liquid in the short-term and have adequate profits for the long-term. These persons examine both the liquidity and profitability of the firm. In addition to liquidity and profitability, the owners of the firm i.e. the shareholders are concerned about the policies of the firm that affect the market price of the firm's stock. Without liquidity, the firm cannot pay cash dividends. Without profits, the firm would not be able to declare dividends. With poor policies, the common stock would trade at low prices in the market. Keeping in view the above discussions regarding the category of users, financial ratios fall into three groups as follows: Liquidity

The Main Principles of Management Essay Example | Topics and Well Written Essays - 500 words

The Main Principles of Management - Essay Example This makes them responsible for operational decision making and performance improvement (Hill, 2006). The third principle is an integration of effort whereby the entire organization moves towards a common objective regardless of one’s position in the organization. The fourth principle involves the business taking a lead in determining industry standards and practices, being out-front. The fifth principle is being up-front, meaning that everything is conducted with integrity and openness. The sixth principle is resourcing the medium term which means that the business is able to effectively balance short and medium-term requirements. The business is able to make orders and supplies in good time (Carpenter, 2009). The seventh principle is time-based. This calls for timely orders, supplies and dealing with emergencies as required. This helps in ensuring that employees do their work within a given time frame and deliver to clients in good time. The eighth principle is bias for action and this means that the business is good at implementing ideas and strategies. When ideas and strategies are shared out and not acted upon, they are not useful and do not improve the workers and business as a whole. The ninth principle is learning focus whereby everyone in the business gets involved in a learning or development programme. This ensures that the business grows as well as the people in and working for the business (Hill, 2006). The tenth principle is discipline. The business invests in policies, procedures and standards that are to be upheld, failure to which penalties are applied. The eleventh principle is that of measurement or reporting and publication. This involves measuring and reporting to the employees’ financial and non-financial performance information needed to excel. Customer value is the twelfth principle and involves all employees striving to enhance customer value creation. This helps in getting and retaining customers. The thirteenth principle is capabilities creation whereby business and organisational capabilities are defined as priority areas.  Ã‚