Internal And External Users Apply Various Analytical Tools

Internal And External Users Apply Various Analytical Tools Such As Ho

Internal and external users apply various analytical tools, such as horizontal analysis, vertical analysis, and ratio analysis, to evaluate the performance and financial condition of a company. Imagine that you are looking at investing in a company, but you feel you need to learn a little more about the company to see how it has performed in the past. You want to know if the investment is a safe one. In this situation, which of the three analytical tools mentioned above would you use to evaluate the company’s performance and financial condition? Why would you choose that analytical tool? What would you be able to learn about the company based on that tool? 5-7 sentences

Paper For Above instruction

When considering an investment in a company, especially when evaluating its past performance and financial stability, ratio analysis stands out as the most effective analytical tool among horizontal analysis, vertical analysis, and ratio analysis. Ratio analysis provides specific ratios, such as liquidity, profitability, and solvency ratios, which allow investors to assess the company's financial health comprehensively. By examining these ratios, I would be able to evaluate how well the company manages its assets, liabilities, and profitability over time, offering insights into its operational efficiency and financial stability. Additionally, ratio analysis facilitates comparisons with industry benchmarks and competitors, helping to determine whether the company is performing above or below industry standards. This focused approach makes ratio analysis particularly valuable for assessing investment safety, as it reveals the company's ability to generate profit, meet its short-term obligations, and sustain long-term growth. Overall, using ratio analysis enables a detailed and quantifiable understanding of the company's financial condition, supporting informed investment decisions.

References

  • Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis (11th ed.). McGraw-Hill Education.
  • Gibson, C. H. (2018). Financial Reporting & Analysis (13th ed.). Cengage Learning.
  • Penman, S. H. (2013). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.
  • Higgins, R. C. (2012). Analysis for Financial Management. McGraw-Hill.
  • White, G. I., Sondhi, A. C., & Fried, D. (2003). The Analysis and Use of Financial Statements. Wiley.
  • Revsine, L., Collins, W., Johnson, W., & Mittelstaedt, F. (2015). Financial Reporting & Analysis. Pearson.
  • Palepu, K. G., Healy, P. M., & Peek, E. (2019). Business Analysis & Valuation: Using Financial Statements. Cengage Learning.
  • Fraser, L. M., & Ormiston, A. (2018). Understanding Financial Statements. Pearson.
  • Penman, S. H. (2012). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.

Related Assignments