INTERPRETING FINANCIAL RESULTS
Interpreting Financial Results
University of Phoenix
July 15, 2013
Business owners and entrepreneurs
use financial ratios as a measuring analysis
tool for management performance and benchmarking. Financial ratios include asset
turnover, liquidity, calculations in profitability, and financial leverage. Liquidity ratios aid
business managers in determining how well their business can satisfy short-term financial
responsibilities. Asset turnover ratios show indicators that inform managers how well the
business uses assets to create sales in revenue.
By calculating the financial leverage of a
business, that business will know it’s the long-term responsibility. When calculated,
profitability ratios show the individual profits that are earned from a good or service.
The main reason businesses create a balance sheet is to find out the business
working capital (capital that sustains the business). Working capital also refers to the