Analysis of Financial Statement Essay -- essays research papers

To determine Panoramas financial positions, we need to use ratio analysis. There are four main categories we faecal matter use. They are liquidity, activity, profitability, and debt or financial leverage.The first category Panorama needs to look at is liquidity. This is measured in three different ways. Working capital, trustworthy ratio and the acid-test ratio. Working capital can be described as a companys current assets minus its current liabilities. Panoramas working capital would be $833.89. The second is the current ratio in which we would find by taking a companys assets divided by its current liabilities. In this case Panorama had current assets of $1808.89 and current liabilities of $975.00. A companys current ratio is very important in determine its bill paying capacities. The third category, the acid-test ratio, is a good method to determine if a company will be able to meet their short-term financial obligations. Acid-test ratio is found by taking the companys curren t assets minus inventories and dividing that by their current liabilities. Panorama had an acid-test ratio of 1.3, which indicates that it is a company with commensurate liquidity. One thing to keep in mind when measuring liquidity would be to know what method of cost flow assumption was used, FIFO or LIFO. This would have an affect on the working capital and the current ratio so we will need to know this when comparing to other companies.Activity measures are the other measures used in ration analysis. Tur...