Interpreting Financial Results

In: Business and Management

Submitted By kjaj2003
Words 657
Pages 3
Interpreting Financial Results
September 29, 2014

Interpreting Financial Results
Business owners and managers need to fully understand financial ratios and how useful of a tool they are to measurement management benchmarking and performance. Financial statements provide the information needed to calculate financial ratios which will consist of liquidity ratios, financial leverage, and profitability. Each ratio will provide a deeper look into the company. Financial leverage ratios will determine the company’s long term solvency. Liquidity ratios will give managers the support to monitor short term financials. Profitability ratios will inform managers how efficient and profitable the company is compared to other businesses in the industry. The sample of financial statements from Dean Foods will give a breakdown of three years’ worth of financial ratios.
Current Ratio is a liquidity ratio used by managers and shareholders to the liquidity of the company. To calculate current ratio managers would divide current assets by current liabilities. More liquidity is what manger and shareholders are looking for to determine whether the company has the ability to cover the short term liabilities. In 2010 Dean Foods current ratio is 1.23, in 2011 the current ratio is 0.98, and in 2012 the current ratio is 1.07. Reviewing the numbers provided in 2010 Dean Foods was in the best situation to pay off short term debts and in 2011 Dean Foods was in the worse position out of the three years to cover short term debts. After a drop in 2011 Dean Foods was able to reduce total liabilities and have more assets than liabilities once again.
Quick Ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. The quick ratio will measure the dollar amount of liquid assets available for each dollar of current liabilities. To…...

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