Although ratios are easy to calculate by themselves, they are often not meaningful and can lead to erroneous conclusions if they are not analyzed in a broad context. Ratio analysis is only one part of the total financial statement analysis of a company.
What is meant by the statement, "The key to financial analysis is getting behind the numbers?"
What are some ways that cash is consumed by a business through financing activities?
2) 300 words with the cited references
You and thevice presidentof accounting will be meeting with the chief financial officer (CFO) to discuss critical areas of the operating budget for next year, as well as thecapital budget.
The following issues are of a particular concern to the CFO:
The company's working capital position
The impact of some short-term notes that the company must pay off next year
The company's current ratio
Determining how to finance a major capital project (construction of a new production plant)
You and the vice president of accounting are meeting in preparation for the meeting with the CFO. Provide examples forand discuss the following topics:
- How working capital can impact a company's finances
- What the company can do to handle short-term debt that is coming due
- The current ratio, its implications, and what a good current ratio would be
How businesses make capital budgeting decisions