Forcasting

In: Business and Management

Submitted By vond
Words 590
Pages 3
Forecasting by Yvonne Dickens

Financial analysis is evaluating, interpretation and selecting financial data and other information to help with investing and decision making. Financial data is provided by the company in annual reports and required disclosures. Financial data can also be collected from financial press, the electronic media, and economic data. However most information needed for financial analysis is the income statement, balance sheets, and statement of cash flows. The use of ratios helps to analysis the financial data to help forecast where the company is headed. There are several different ratios that should be used. Ratios can be classified as a coverage ratio which measures ability to meet obligations, a return ratio that measures net benefit to used resources, turnover ratios measures gross benefit to used resources, and component percentage the ratio of one component of an item to an item. The liquidity ratio is the measurement of a company‘s ability to create enough cash to meet their needs. There are three ratios for liquidity: 1. Current ratio determines if the company can meet its liabilities with its assets. 2. Quick ratio determines the company‘s ability to satisfy liabilities with its liquid assets. 3. Net working capital to sales ratio indicates current assets minus current liabilities divided by sales. If these ratios are large the company has the ability to liquidate and satisfy is obligations. Activity ratios like inventory turnover, accounts receivable, turnover, total asset turnover, and fixed asset turnover measures how assets are used. Inventory turnover is how inventory is created and used which is the ratio of cost of goods sold to inventory. Accounts receivable turnover indicates how often in a period credit sales have been collected on. Total asset turnover ratio is the investment in sales to total assets. The…...

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