Question
Financial statements contain a lot of information.The numbers could be very large, but does large always mean good? As an example, suppose a company that
Financial statements contain a lot of information.The numbers could be very large, but does large always mean good? As an example, suppose a company that has operating revenues of one billion dollars has only $100,000 in it's bank account compared to let's say a company that has operating revenues of one million dollars that has the same $100,000 in the bank.Do you think the two companies are equally financially positioned? Looking at only one piece of information is not enough.To see if the company is a solid investment, we canuse some analytical tools.
Explain how to calculate the following ratios and discuss what each ratio will tell the financial statement reader.
Liquidity:Current Ratio
Profitability:Earnings per Share
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