Financial Analysis Assignment Example | Topics and Well Written Essays - 500 words

Financial Analysis - Assignment Example cial ratio are the management team in evaluating the performance of the company in terms of profitability, operational efficiency, and financial health over a period of time by comparing past and present ratios, and also comparing this with the industrial average (Brigham, 2012). Shareholders are other groups that use information from ration analysis. Information in the financial statement is usually difficult for outsiders to understand. The ratio analysis helps in analyzing and interpreting information from the financial statements in a simplified manner, and in a manner that can be understood by those who do not know the accounting language. This information helps them know the position of their investment and expected returns from their investment. The ratio analysis is useful in analyzing the liquidity of the company. This information is useful to the third group that uses the ratio analysis are the creditors. They are able to know the company’s capacity to meet their lon g term liabilities which determines the credit terms. Financial analysis usually tries to determine the qualitative factors when evaluating the future financial performance. One qualitative factor is the competitive advantage which determines the company’s ability to survive in the market. This also determines the company’s ability to keep competitors at bay, enjoy profits, and growth. Corporate governance has become a crucial issue today which determines the relationship between directors, management, and other stakeholders. One aspect of corporate governance is financial transparency. This implies that the financial information is being released in a manner that stakeholders are able to follow what the management if doing, thus have a clear understanding on the financial situation. This also increases the trust that stakeholders have in the company, ensuring a long term relationship. Finally, the structure of the board of directors under corporate governance determines the future