ACC 230 Week 8 Assignment Presenting to Stakeholders A+Material
Week 8 – Assignment
Presenting to Stakeholders
“Financial statements provide insight into the company’s current status and lead to the development of policies and strategies for the future.” (Axia, 2007) Financial statements and notes to the financial statements should be used to analyze the company. For instance what do the financial statements reveal about why the company has requested a loan or purchased items on credit? What is the firm’s capital structure and what does the firm have outstanding? How well can the company pay back debt? What recourses are used to pay debt. What is the company’s performance record and are there any future expansions? What are the expected returns and how successful is the company compared to industry averages? Which areas of operations contributed to the company’s success, and what are the strengths and weaknesses of the company? What changes can be made to improve the future performance of the company?
Key financial ratios will assist in determining the information requested. Liquid ratios measure a firm’s ability to meet cash needs as they arise. The current ratio is a good tool to use because it measures the ability the firm has to pay debts when due. The current ratio for REC is at 2.4 times for 2007, although it is down from 2006 the company is still able to pay current debt when due. Cash flow ratio considers cash flow from operating activities has increased from 2006, and this indicates an improvement in short-run solvency. Average collection period has gone down 5 days within the last year. The cash conversion cycle gives in-site on why the cash flow has improved or decreased, in this case the conversion period for REC has improved by 26 days.
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