Liquidity ratios
Liquidity ratios provide clues to how effectively a company manages its cash collection cycle. Asset turnover ratios reveal how efficiently a company uses its assets to generate profits and cash flow. Debt management ratios reveal how leveraged a company is, which provides an indication of future risk. Taken together, a company’s ratios and its ratios compared to industry competitors provide important insight into the investment strength of the company’s stock. In this assignment, you will evaluate your company’s financial ratios and compare your chosen company’s ratios to the overall industry ratio performance.
Write
In your paper,
- Evaluate the trends in your company’s performance ratio over the past 5 years, using the Annual Financial Ratios PDF you obtained for your selected company. Be sure to address the trends in:
- Profitability, including
- Margins
- Returns
- Liquidity & Leverage, including:
- Efficiency (turnover ratios)
- Liquidity (quick ratio, current ratio)
- Leverage (debt ratios)
- For each category, determine if the company’s performance is improving through the most recent year, deteriorating, or staying about the same.
- Profitability, including
- Interpret the ratios with respect to the company’s future risk and cash flow.
- Identify which ratios are the most meaningful with respect to the company’s future risk and cash flow.
- Compare your chosen company’s ratio performance to its peer competitors’ ratios in the Peer Competitor Ratio Comparison guide you obtained for your selected company. Be sure to address the trends in:
- Profitability and management effectiveness, including
- Margins
- Returns
- Financial strength, including
- Liquidity (quick ratio, current ratio)
- Leverage (debt ratios)
- Efficiency:
- Turnover ratios
- For each category, determine if your selected company is outperforming or underperforming the peer competitors.
- Profitability and management effectiveness, including
- Categorize the company’s overall financial performance as strong, average, or weak, based on its ratios and your comparison to its peer competitors.
- Justify your categorization based on your evaluation of these ratios and with respect to the company’s future risk and cash flow.
Format
The Financial Ratio Analysis paper
- must be 2 to 3 double-spaced pages in length (not including title and references pages)
- must include a separate title page with the following in title case:
- title of paper in bold font
- Space should appear between the title and the rest of the information on the title page.
- student’s name
- name of institution (The University of Arizona Global Campus)
- course name and number
- instructor’s name
- due date
- title of paper in bold font
- must utilize academic voice.
Requirements: clear
Answer preview to Liquidity ratios
APA
600 WORDS
