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Assessing Financial Information

Learn how to assess financial information sources to make informed decisions, including internal and external sources. Explore key ratios for profitability, liquidity, debt, and asset activity. Evaluate data analysis methodologies and identify misleading conclusions.

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Assessing Financial Information

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  1. Assessing Financial Information Statistics & Risk Management

  2. Two Main Sources • Internal • Finance Department • Accounting Department • External • News Media • Universities • Government

  3. Technology Computerized Financial Accounting Systems. Web Browser Based Markets & Brokers. Hand-Held Delivery Systems. TV and Radio Delivery Systems

  4. Preliminary Assessment • Consider the Source. • Consider the Objective. • Consider the Audience. • Look beyond the conclusions and examine the data! • How does it apply to you? • Is an Action necessary? • Are procedural or policy changes needed?

  5. Cynics Look at Sample Size and Selection Gathering Methodologies Analysis Methodologies Incomplete Data Picture Misleading Conclusions

  6. Assessment Ratios • Profitability Ratios measure the profitability of the organization. • Gross profit margin • Operating profit margin • Net profit margin • Return on assets (ROA) • Return on equity (ROE)

  7. Assessment Ratios • Liquidity Ratiosmeasure the organizations ability to meet short-term obligations. • Current ratio • Quick ratio

  8. Assessment Ratios • Debt Ratios measure the amount of debt an organization is using and the ability of the organization to pay off the debt. • Total assets ratio • Times interest earned ratio

  9. Assessment Ratios • Asset Activity Ratios measure how efficiently the company is using its assets. • Average collection period ratio, • Inventory turnover ratio, and • Total asset turnover ratio.

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