Essays financial ratio analysis report

The abuse faced by developing countries at the hands of MNCs has now become almost unbearable. The international financial structure that accentuates the free market way of thinking, denationalization and a decrease in the involvement of the public sector is thwarting many developing and underdeveloped countries from sanctioning a fair and reasonable progress, on the basis of human rights. MNCs have uncountable funds, are only inclined to maximize profit, use the least amount of employees possible, jump from nation to nation without much consideration , import employees rather than using the local labor, and refuse to acknowledge the social requirements of the state they operate in. All these activities directly impact the socio-economic rights of the public. As a consequence of these elements and several other international monetary problems such as inadequate technology transmission, absence of external investment and the brain drain, various developing countries need guidelines in order to react efficiently to the circumstances. [6]

However, professional accounting practice requires reports to external users to be on an accrual accounting basis. This is because the accrual accounting profit figure is a better predictor for investors of the future cash flows likely to arise from the dividends paid to them by the business, and of any capital gain on disposal of their investments. It could also be argued that the cash flow may not be a fair representation of the commercial substance of transactions; . if a business allowed a year’s credit to all its customers, there would be no income recorded.

Profitability ratios tell how well the organization is doing in terms of generating returns for its shareholders. Debt ratios include debt-equity ratio and interest coverage ratio. Debt ratios give idea about the leverage of the company. High debt ratios are a cause of concern because they reduce returns for the shareholders since a portion of net income is used to pay interest on the debt. Investment valuation ratios include price earnings ratio and price sales ratio. Investment valuation ratios indicate the price being paid by the shareholders relative to the value of the firm. High price earnings ratio indicates a more optimistic outlook of the organization’s future but they also mean the stock is relatively expensive to purchase.

Essays financial ratio analysis report

essays financial ratio analysis report

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