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MBA 524 MBA524 MBA/524 week 3 assignment finance.docx

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MBA 524 MBA524 MBA/524 week 3 assignment finance.docx

Assignment 3 – University of Regina Club Champlain CollegeMBA-524-85 Financial Decision Making Professor Miceli 11/14/2020

1.How do you evaluate the financial performance of a business using financial statements?
In evaluating the financial performance of a business using financial statements, investors examine its financial position by studying financial statements and calculating certain ratios (McClure, B., 2020).

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MBA 524 MBA524 MBA/524 week 3 assignment finance.docx

Assignment 3 – University of Regina Club Champlain CollegeMBA-524-85 Financial Decision Making Professor Miceli 11/14/2020

1.How do you evaluate the financial performance of a business using financial statements?
In evaluating the financial performance of a business using financial statements, investors examine its financial position by studying financial statements and calculating certain ratios (McClure, B., 2020).
McClure also states that a company’s worth is based on its market value and to determine market value, a company’s financial ratios are compared to its competitors and industry benchmarks.
Key financial ratios that are used in the evaluation include: the current ratio, quick ratio, total asset turnover, receivables turnover, inventory turnover, debt ratio, debt-to-equity ratio and interest coverage ratio. Once the financial statements/ratios have been calculated, analysts can begin digging deeper.
Techniques such as horizontal and vertical analysis, time-series analysis, cross-sectional analysis and financial ratios’ analysis are followed. These techniques include liquidity ratios, efficiency ratios, profitability ratios and leverage ratios.
Statements used by these analysts/accountants include: balance sheet, income statement and cashflow statement, which assess the performance and identify areas of concern that require action to be taken.
Additionally, shareholders look at them to keep tabs on their capital, while investors look at them to identify opportunities (Eccles, R., 2019). As one of the main goals in financial analysis is to predict the future performance of the company, it makes sense to begin by mappingtrends from previous years and financial statements.
It can be difficult to predict the future, but inusing the past as a resource, analysts can at very least avoid making the same mistakes twice. However, it is important that the analysts look at data that covers at least three to five years in order to really analyze the different trends that might have occurred.
Unfortunately, for companies that do not have as many years of data, this really limits the information available. Another way to analyze data and determine whether or not the specific organization is in line with the rest of the industry, analysts can utilize benchmarking. Benchmarking includes four
steps: first, identifying problem areas, secondly, purchasing a current benchmarking report, third,analyzing the KPI’s and processes that produce superior performance and lastly, implementing new and improved business practices (Benchmarking… 2020). This practice will ultimately give

MBA 524 MBA524 MBA/524 week 3 assignment finance.docx

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