Discussion: Discuss the four major ratio categories and how they affect the organization’s financial performance. Provide examples
NUR 621 Topic 8 DQ 2 Assessment Description
Discuss the four major ratio categories and how they affect the organization’s financial performance. Provide examples.
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NUR 621 Topic 8 DQ 2 Sample
Financial ratios have become vital indicators of organizational financial performance. They have emerged as essential decision-making tools that offer information for making financial-related decisions. The organization’s leadership and stakeholders use these ratios to evaluate the financial health and growth potential (Myšková & Hájek, 2017). Financial ratio analysis is a tool utilized to evaluate an organization’s past achievements and future possibilities. The information from these ratio analyses can be used to promote the prosperity of the organization.
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There are four types of financial ratios: liquidity, activity, financial, and profitability ratio. NUR 621 Topic 8 DQ 2 The liquidity ratio illustrates the correlation between an entity’s cash and other current access in its possession (Novyarni & Ningsih, 2020). There is also consideration of the current debt. There is also the activity ratio, also referred to as the efficiency ratio, which evaluates the efficiency of an entity using its assets. Another financial ratio is the financial leverage ratio, which examines how an entity utilizes funds from debts (Novyarni & Ningsih, 2020). Lastly, there is a profitability ratio that demonstrates an entity’s ability to benefit from the utilization of its capital.
Financial ratios are vital tools to determine the financial performance of an organization. They are important in offering information to make decisions necessary to promote an organization’s financial performance (Kamal, 2023). For instance, the current ratio shows the present assessment for an organization to address current liabilities. A study of Google LLC’s current ratio has been on a downward trend over time (Abdelsalam & Nobanee, 2020). However, their current liabilities have been on an upward trend. However, the current ratio is above three, which shows that the company can pay its liabilities. These shows the importance of financial ratios in financial performance.
NUR 621 Topic 8 DQ 2 References
Abdelsalam, A., & Nobanee, H. (2020). Financial statement analysis of google. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3647444
Kamal, A. G. (2023). The impact of financial ratios on bank performance before and during COVID-19: Evidence from Bank Business Activities category 3 and 4 in Indonesia. European Journal of Business and Management Research, 8(3), 305–315. https://doi.org/10.24018/ejbmr.2023.8.3.1995
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. Journal of International Studies, 10(4), 96–108. https://doi.org/10.14254/2071-8330.2017/10-4/7
Novyarni, N., & Ningsih, L. N. (2020). Comparative analysis of financial ratios and economic value added methods in assessing company financial performance. Proceedings of the Annual International Conference on Accounting Research (AICAR 2019). https://doi.org/10.2991/aebmr.k.200309.031 NUR 621 Topic 8 DQ 2
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