Financial Ratio Analysis Report Essay Example | Topics and Well Written Essays - 1500 words

Financial Ratio compend Report - Essay ExampleAnalysis and interpretation of fiscal statements helps to evaluate the fiscal position and performance of an enterprise. GM generated record terzetto quarter automotive tax income of $43.1 billion. The comp any also achieved record global third quarter sales of 2.39 million cars and trucks, up four-spot portion compared to the third quarter 2006, driven by exception onlyy strong demand in uphill markets and improved performance in developed markets. GM also set a number of third quarter sales records around the globe, including a 22 percent increase in GMLAAM, 16 percent increase in the GMAP region, and 15 percent gain in GME. (GM Reports third quarter fiscal results, 2007). Analysis of Fundamental Ratios and TrendsRatio analysis is one of the important tools used to develop and interpret the financial statements of a business entity. Ratios measure the efficiency of ope ration of a business unit. More everywhere, it also helps to an alyze the financial military force or weakness of a business entity. The economic growth of the company is steady and stable. Like all other areas, the company is highly concentrating in the area of accounting and finance also. Similarly, a well define plan is maintained by the company for protecting its quantum of stock-Ge1. Maintain control over the immaculate amount of raw material obtained from the suppliers. 2. Utilize these quantum of raw materials for the production of goods with appropriate control and without making any wastage. 3. After making the delivery of finished goods, company tries to restore the balance of material/ inventory for advertize process. General Motors, a leading automobile manufacturer is following a systematic procedure for evaluating the financial performance of the entity. The major ratios are being calculated by GM for the analysis and interpretation of financial measurement are current ratio, quick ratio, asset turn over ratio, inventory turn o ver ratio etc. Therefore, the fundamental accounting ratios of GM are depicted below-Estimated Financial Ratios of General Motorsa. . fluidness Ratios 1. Current Ratio = Current Assets = $1,000 Current Liabilities$310= 3.2 times.2) Quick ratio= Quick Assets/ Current liabilities= $385/ $310 = 1.2 times.b) Leverage Ratios-1) Debt ratio= Total Debt/ Total Assets=$1,064/$2,000= 53.2%2) Debt to straighten out worth ratio= Total Debt/ Tangible Net Worth= $1,064/$2250= 47.29%.c) direct ratios-1) Net sales to Total Assets= Net Sales/ Total Assets=$3,000/$2,000= 1.5 times.2) taxation profit ratio= Gross profit/ sales= 1,500/3,000= 50%d) Profitability ratios1) Basic Earning Power-(BEP) = EBIT/Total Assets= $283.8/ $2,000= 14.2%2) Return On Total Assets (ROA) = Net income to stock holders/ Total Assets= $113.5/ $2,000= 5.7%3) Price Earning Ratio (PE) = Price per share/ Earnings per share= $23/2.27= 10.1 times.4) marketplace ratio= Common fairness/ Shares out standing= $896/ 50= $17.925) R eturn On Common Equity (ROE) = Net income to