Financial accounting Essay Example | Topics and Well Written Essays - 1000 words - 4

Financial history - Essay ExampleReturn kind of ratios represents the ability of a companionship to measure its overall might more so in generating the returns to the shareholders. On the other hand, ratios that indicate margin illustrate the ability of the association to translate its sales dollars into profits. This therefore implies that the main purpose of profitability ratios is to measure the ability of a caller to generate its earnings relative to assets, equity and sales.Liquidity ratios indicates the ability of a company to meet or pay off its short term debt obligations or short term liabilities as they fall due. It indicates the companys low default risk in case the ratios are more than one.The companys current ratio is increasing over time indicating that the companys ability is increasing as well. This means that the company is able to meet its short term liabilities with ease hence it is having a exalted performance.The companys quick ratio is less than one implyi ng that its most liquid assets are non enough to meet its short term obligations. This means that the company is over-leveraged, collecting its receivables slowly, paying its bills too readily or struggling to grow or maintain sales. However, the trend indicates an increase in the companys most liquid assets evidenced by increase in quick ratio.Efficiency ratio sanction the company to measure how effectively it is utilizing its assets and or how well its liabilities are managed. These ratios translate how efficient the assets of a fear are working to generate sales. They therefore assist a blood manager conduct business better. They show how quickly a companys money from credit sales is collected or the number of times a companys inventory turns over. Their main purpose is therefore to show how effective the management of the company is.The company has a high turnover ratios meaning that it is using a couple of(prenominal) assets to generate more revenue hence it is very effi cient in its