Financial Performance And Position Of A Business Using...

P5. M2. D2.Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation.Analyse the performance of a business using suitable ratios.Evaluate the financial performance and position of a business using ratio analysis. Starbucks. The research method will consist of literature and financial data study. The data sources will be: Starbuck annual reports, and expert opinions. Starting from the balance sheet and Income statement of Starbucks will be analyzed. Different categories of ratios (profitability, efficiency and liquidity) will be calculated. Finally, the obtained ratios will be compared with ratios of last years in order to know how good or bad is the financial situation of Starbucks. Financial†¦show more content†¦Liquidity is not only a measure of how much cash a business has. It is also a measure of how easy it will be for the company to raise enough cash or convert assets into cash. Assets like accounts receivable, trading securities, and inventory are relatively easy for many companies to convert into cash in the short term. Thus, all of these assets go into the liquidity calculation of a company. The ratios that will be calculated under this category are: -Current Ratio= current assets/ current liabilities, Providers of short term credit prefer a high current ratio. -Quick Ratio= current assets-inventory/ current liability Also commonly known as acid test ratio, it is a more severe test of liquidity as it does not include inventory as a liquid asset as they are not guaranteed to be sold, they may become obsolete or deteriorate. Profitability ratios Profitability ratios compare income statement accounts and categories to show a company s ability to generate profits from its operations. Profitability ratios focus on a company s return on investment in inventory and other assets. These ratios basically show how well companies can achieve profits from their operations. Investors and creditors can use profitability ratios to judge a company s return on investment based on its relative level of resources and assets. In other words, profitabilityShow MoreRelatedFinancial Ratio Analysis in a Company859 Words   |  3 Pagesto Olowe (1997), Financial Ratio Analysis is the relationship between the performance of a company and the monetary data in the financial statements to assist the economic conditions. Financial ratio was defined by Robert (1994) as two financial variables being used that have been taken from either the income statement or from the balance sheet. Ratio analysis is a tool that is brought in by individuals to perform an evaluative analysis of information in the company’s financial statements. It isRead MoreFinancial Performance Analysis1727 Words   |  7 PagesLITERATURE Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a tool in decision-making processes related to stocks, bonds, and other financial instruments. Analysis of financial statements provides valuable information for managerial decision. Financial analysis is commonly called analysis and interpretation offinancial statement. Analysis of financial statements means establishingRead MoreRatio Analysis : Analysis And Interpretation Of Financial Statements1490 Words   |  6 PagesRatio analysis is used to describe the important relationship that lies between figures based on line items in financial statements like the balance sheet, profit and loss account, and a budgetary control organization. Ratio analysis is a technique of analysis and interpretation of financial statements. It helps in evaluating the financial position and performance of the firm, ratio analysis also allows firms to compare their operational or financial performance to another firm or the industry standardRead MoreTraditional Financial Reporting and its Limitations962 Words   |  4 PagesIntroduction In a more general term, financial statement states the details of an organization, entity and business financial activities. It provides information about the financial performance, position as at a given date, changes in financial position, etc., that are useful for economic decision. Some of the information content may include the statement of an entity’s assets (non-current and current), liabilities (short and long time), ownership structure, and statement of income, expenditureRead MoreUsefulness And Limitations Of Financial Ratios1510 Words   |  7 Pageslimitations of financial ratios in evaluating the performance and management of companies Ratio analysis is used to describe the important relationship that lies between figures based on line items in financial statements like the balance sheet, profit and loss account, and a budgetary control organization. Ratio analysis is a technique of analysis and interpretation of financial statements. It helps in evaluating the financial position and performance of the firm, ratio analysis also allows firmsRead MoreEvaluation Of Financial Position And Performance Of Uk Banking Sector1163 Words   |  5 PagesEvaluation of Financial Position and Performance of UK Banking Sector with Respect to Liquidity and Profitability Research Background: Several research studies have done not only about the importance of performance evaluation (financial and non financial) of banks but also for the impact of analysis to the economy and various stakeholder groups. Generally the financial performance of banks and other financial institutions has been measured using a combination of financial ratio analysis, measuring performanceRead MoreRatio and Financial Ratio Analyisis1712 Words   |  7 PagesRatio and Financial Statements Analysis Kimberly Y. Gruber University of Maryland University College Dr. Sunando Sengupta 07/25/2013 Turnitin Score: 23% Executive Summary The purpose of this paper is to examine ratio and financial statement analysis. Such analysis is a useful tool for managers and stakeholders to evaluate a company’s financial health in order to identify opportunities for growth and areas of weakness so as to institute corrective measures.   Financial statements are usedRead MoreEffectiveness And Limitations Of Ratio Analysis1540 Words   |  7 PagesRatio analysis is the fundamental indicator of company’s performances for so many years; it is also can be seen as the very first step to measure a company’s performance along with its financial position. Moreover, ratio analysis has been researched and developed for many years, Bliss had presented the first coherent system of ratios, and he also stated that ratios are â€Å"indicator of the status of fundamental relationship within the business† Horrigan (1968). However there are some arguments on whetherRead MoreCase Study Analysis : Starbucks Corporation 1431 Words   |  6 Pagesbeverages and fresh food items, throughout all company-operated stores. The consolidated financial statements reflect the financial position and operating results of Starbucks Corporation. Ratio Analysis was used to analyze the performance of Starbucks using the financial ratios of liquidity, solvency, and profitability. Calculations and amounts were provided in the excel spreadsheet labeled â€Å"Financial Ratios†. All data provided were conducted from the balance sheet and income statement accounts overRead MoreIntroduction. The Aim Of This Report Is To Analyse The1283 Words   |  6 Pagesanalyse the financial position of Hillside Engineering – organisation presented in the case study and evaluate the proposed investment in upgrading its production facilities. It will present and use an appropriate frameworks which will examine the alternative strategic options that organisation could consider to secure its future position. Finally, it w ill advise Hillside on the importance of mission, values and objectives in defining and communicating the strategy of the company. Analysis and evaluation