Interpreting Financial Reports

Companies like ABC SDN BHD, a corpo symmetryn in Malaysia make up and furnish financial statements on a regular basis for the aspiration of providing stakeholders reports of the companys financial standing. However, accounting is not easy to essay regarding how a particular company is doing financially in relation to others in the industry. One of the best ways to compare both businesses is to perform a ratio analysis on the companys financial statements. A ratio analysis is roughhewnly using up of skilfuls and services in financial statements that looks at various total, such as net profit or quantity expenses and analyze the relationship between each other. fit in to Parrino, financial ratios are use in financial analysis to eliminate problems caused by comparing two or much companies of different size or when looking at the same company over time as the size changes (p. 85) fiscal symmetrys are grouped by their purpose but the most coarse ratios are Liquidity, Debt, derangement, and Profitability. The key users of financial ratios have variations. Short-term creditors may use liquidity ratio. Potential lenders or existing lenders may use supplement ratio, and top corporations may use swage ratio.Investors and stockholders may be more interested with profitability ratio to get their information. The two most common Liquidity symmetry are Current and Quick Ratio. Inventory Turnover Ratio, Accounts Receivable Turnover or Total Asset Turnover ratios grass be used to determine a companys turnover or efficiency ratio. To determine a companys leverage, the Debt Ratio or the Debt-to-Equity Ratio is the preferred tool to use. The Return on Assets Ratio burn down determine the profitability of the company,The financial highlight of ABC SDN BHD, a corporation in Malaysia describes profitability, liquidity, assets, and capital. The companys profitability shows a subside in turnover, recovery of earnings, and lower cost of sales but higher(prenominal) total operating expenses. The companys liquidity shows a copesettic liquidity standing and experienced cash flow inflexibility. The companys asset management shows a reduced efficiency of the management of units and assets, elongate collection but shortened payment periods, and a good muniment control.The companys capital structure and solvency undertaken a much greater current liabilities than long-term liabilities to finance its operation, and the current liabilities are reported to be rising. There is a lower leveraged for the group more dependent on equity than debt to fund its assets. Through financial statements, a company can compare and rate their performance with related industry. The key is to select companies to enthrone in and compare rate of returns, future terms, and evaluate potency and short points.Comparative study of ratios and benchmark are useful for investors and management. Management can use it to get information for future decision-making process, and i nvestors can analyze related risk. According to Northwest Farm Credit Service, a ratio greater than 1. 50 is considered good, between 1. 00 and 1. 50 is descent, and less than 1. 00 is not promising. Equivalent to at least 20 % of total annual operating expenses is fakir for debt to assets ratio and should be less than 30 % to be thought of as a good one. 30 to 50 % descent and greater than 50 % is considered poor.Operating margin of 25 % or greater is good, 10 % to 25 % descent, and less than 10 % is beneath average (2008) Ratio comparison provides important information to businesses and potential investors and shareholders. However, although ratio calculation provides a glimpse of the financial status, of a company, it can be misleading if not interpreted properly. Fluctuations occur from quarter to quarter and numbers can change, depending upon sales, stocks, revenue, and operating cost. Ratio comparison is a valuable chuck if caution is taken into consideration.