Financial Management Assignment Example | Topics and Well Written Essays - 2000 words

Financial Management - Assignment ExampleThe analysis of the data present in the pecuniary statements helps the top level management of the government to take a correct decision. The decisions taken after proper analysis of the financial statements be appropriate having trim back chances of flaws. The financial statement is known as the raw form of data which cannot be utilized by anyone without proper knowledge. In such case carrying into action of different types of analysis beasts bring accuracy in the analysis process. Ratio analysis is one such important analysis tool which helps in the analysis of the financial performance of an organization. Ratio Analysis Any sustainable business needs effective financial planning. Ratio Analysis is an essential management tool which helps in improving the financial performance of an organization over time along with providing key indicators associated with the organizational performance (Siddiqui, 2006). The managers use ratio analysi s for assessing the strengths and weaknesses of the organization based upon which new strategies can be evaluated. ... s financial performance, the financial ratios act as an indicator indicating the places where the confederation requires rectification for achieving competitive advantage. Moreover when the ratios are far above or below the industry standards then it indicate that the company needs to change its existing strategies for bringing their ratio values bordering to the industry average. There are mainly four types of ratios 1) Liquidity ratio 2) Profitability Ratio 3) Solvency Ratio 4) Efficiency ratio Liquidity Ratio The runniness ratios help in determination out whether a company is able in repaying its short term debt in a proper manner. This ratio is truly significant because if any company fails in meeting its short term liabilities then it may even lead to bankruptcy (Gallagher and Andrew, 2007 Hitchner and Mard, 2011). High liquidity ratios mention that the o rganization is performing in an efficient manner for meeting the short term liabilities. In the context of liquidity ratio, two ratios of Kingfisher Plc have been calculated. The first is the up-to-the-minute ratio and the second is the quick ratio. afoot(predicate) Ratio Current Ratio is measured as Current Ratio = Current Assets/ Current liabilities unhurriedness of Current ratio As on 1.1.2012 As on 1.1.2013 Current assets 2989 3068 Current liabilities 3050 2870 Current Ratio 0.98 1.07 The current ratio will help in finding out whether Kingfisher Plc is performing in an appropriate manner in order to meet the short term liabilities or not (Kuppapally, 2008). The current ratio of the company has increased from the year 2012 to 2013. This implies that the inventory value of the company has increased significantly. Kingfisher Plc is utilising the current assets in efficient manner for meeting the current liabilities. Quick Ratio Calculation of