HELP! how to overcome financial problems... (1 Viewer)

[veronica6535]

Okay, so i have this business assessment on thursday on financial ratios & analysis.

I understand liquidity, solvency, etc.. but if anyone can help me on norms set in place to compare the ratios e.g what kind of ratios are bad or which ones are good..

Also, another thing is there any resources that anyone has that shows ways to help liquitity, solvency, etc...

i know factoring, leasing and all that.. but which ones apply to which..

Any resources that can help me understand more will be a big help!!

thanks!

 

[michael1990]

I understand liquidity, solvency, etc.. but if anyone can help me on norms set in place to compare the ratios e.g what kind of ratios are bad or which ones are good..

Well they are all good. They are a measure to see how good or bad the business is doing. So not sure what you are asking?

Also, another thing is there any resources that anyone has that shows ways to help liquitity, solvency, etc...

i know factoring, leasing and all that.. but which ones apply to which..

It depends on the situation. You need to evaluate the Business and determine the most appropiate way.

Any resources that can help me understand more will be a big help!!

thanks!

 

[aq15]

I understand liquidity, solvency, etc.. but if anyone can help me on norms set in place to compare the ratios e.g what kind of ratios are bad or which ones are good..

Also, another thing is there any resources that anyone has that shows ways to help liquitity, solvency, etc...

i know factoring, leasing and all that.. but which ones apply to which..

Any resources that can help me understand more will be a big help!!

thanks!

Ok firstly for your ratios, for solvency is is generally accepted as 0.5-0.7:1 to be good as its lowly geared. And for liquidity ration (CA/CL) it is always good if the business has atleast 1.2:1 but if its too high such as 8:1 or 11:1 then it means there are too much assets and most likely in the exam they can ask u what to do, or if its 0.7:1 or lower.

i know factoring, leasing and all that.. but which ones apply to which..

To use factoring, the business usually has a high accounts receivable, then to turn that into cash immediantly they sell it to a factoring finace company.

Where as leaseing (Sell and lease back) the business sells its machinery, cars and other NCA to then lease it back. This is where they can get money instantly for their assets.

 

[seano77]

Okay, so i have this business assessment on thursday on financial ratios & analysis.

I understand liquidity, solvency, etc.. but if anyone can help me on norms set in place to compare the ratios e.g what kind of ratios are bad or which ones are good..

Also, another thing is there any resources that anyone has that shows ways to help liquitity, solvency, etc...

i know factoring, leasing and all that.. but which ones apply to which..

Any resources that can help me understand more will be a big help!!

thanks!

Return on Owners Equity: 66%
Accounts receivable turnover: 30days

 

[veloc1ty]

Depends on the business. The only rule of thumb worth mentioning is 2:1 liquidity. Everything else varies far too much.

 

[Lorie]

Another important thing to remember with ratios is that they are only useful when benchmarking against other figures. These can be against the industry average, competitors or the companys past years ratios. This is a good way to use ratios to analyse the companys financial performance.