Homework: Applying Ratio Analysis
Textbook: Foundations of Financial Management.
Getting Started
Ratio analysis is useful in evaluating a firm's financial performance. Being able to apply ratio analysis is an important skill for a manager. This homework will teach you how to understand a company's financial performance from year to year and draw conclusions from your analysis.
Upon successful completion of the course material, you will be able to:
a. Employ ratio analysis to make informed business decisions.
b. Apply biblical truth to the functioning of the financial markets.
Background Information
One way to more fully understand and interpret the financial information provided in financial statements is through the use of financial ratios. In this workshop, you will learn how to compute various ratios and interpret the results for use in financial decision-making.
Task
Review Chapter 3 of Foundations of Financial Management and respond to the following questions provided:
a. What is liquidity, and what is the rationale for its measurement?
b. What are the differences among a firm's gross profit margin, operating profit margin, and net profit margin?
c. Explain what determines a company's return on equity.
Format your homework according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.