A financial performance analysis of bundura nickel ltd by mr lenon watambwa (2019) abstract
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| Ratio analysis: Ratio analysis is a quantitative method of gaining insight into a company liquidity, operational efficiency and profitability by comparing information contained in is financial statement. The main categories of ratio analyses are explained below. Liquidity Ratios Liquidity refers to the speed in the transfer of assets into cash, liquidity ratios primarily focus on the cash flows, and it is an indicator to measure a company’s ability to meet its short-term liabilities. Liquidity management is achieved through the effective use of assets (Robinson et al, 2015). Liquidity management plays a pivotal role in the sustenance and continuity of a business or organizations. Organizations have overtime given importance to liquidity ratios as they reflect the organization’s ability to effectively run their operating cycle by being able to settle short term liabilities which include operating expenses and financial expenses. There are many liquidity ratios used by organizations to manage their liquidity such as current ratio, quick ratio, cash ratio, defensive interval ratio) which can greatly affect the financial performance of companies (Robinson et al., 2015). Solvency Ratios: solvency ratios represent at attempt to assess the organization's ability to meet its payment obligations over a longer period of time, such as the next 5 years. Some of these ratios are often referred to as coverage ratios. These ratios emphasize cash payments that must be made every year to avoid default. Such payments include interest and principal payments on loans. The most common solvency ratios include Debt to equity ratio The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total equity. The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. A higher debt to equity ratio indicates that more creditor financing is used than investor financing Equity ratio The equity ratio is an investment leverage or solvency ratio that measures the amount of assets that are financed by owners' investments by comparing the total equity in the company to the total assets. Debt ratio Debt ratio is a solvency ratio that measures a firm's total liabilities as a percentage of its total assets. Ina sense, this ratio shows a company's ability to Electronic copy available at https://ssrn.com/abstract=3521211 6 payoff its liabilities with its assets. In other words, this shows how many assets the company must sell in order to payoff all of its liabilities Download 1.23 Mb. Share with your friends:
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