Group, we will hit on three very important characteristics of a corporation with our ratios; liquidity, solvency, and profitability. Each of these three items measures different aspects of a company. Profitability is just as it sounds, it measures whether or not the organization is making or losing money. Liquidity looks at the short term financial position and whether or not a company has the assets required to cover short term liabilities. Solvency is concerned with long range planning. Solvency measures the long term health of an organization.
All three measures are important. Some are more important to some users than others. Can anyone give some examples of users that would be more interested in one than the other?
Group, we will hit on three very important characteristics of a corporation with our ratios; liquidity, solvency, and profitability. Each of these three items measures different aspects of a company. Profitability is just as it sounds, it measures whether or not the organization is making or losing money. Liquidity looks at the short term financial position and whether or not a company has the assets required to cover short term liabilities. Solvency is concerned with long range planning. Solvency measures the long term health of an organization.
All three measures are important. Some are more important to some users than others. Can anyone give some examples of users that would be more interested in one than the other?