Catapang, Patricia Mae May 31, 2023

TUPM-20-4914 patriciamae.catapang@tup.edu.ph

DISCUSSION PAPER: FINANCIAL RATIO ANALYSIS OF FIRMS: A TOOL FOR

DIECISION MAKING

Accounting and financial management examine and evaluate the items and data in the financial
statements using financial ratios to assess the state of the business. Ratio analysis of financial
accounts will provide information on the company's profitability, financial status, and operational
effectiveness. Making prudent financial decisions or drawing conclusions about the status of the
company will be made easier with the aid of this ratio for various internal and external
stakeholders.

For various viewpoints or positions in the company, several ratio analyses are used. Liquidity,
Current, and Working Capital Ratios are a few examples of these ratios. The Liquidity Ratio,
which is calculated by dividing the firm's liquid assets by its current liabilities, is used to
ascertain whether it can pay its short-term debt. Through this ratio analysis, the company may
ascertain whether it is able to make a loan or pay its debt entirely with its liquid assets. Business
owners, investors, and management can thus make wise choices and take strategic measures in
relation to business and financial management by applying financial statement analysis.

This text reinforces my existing knowledge to provide a more complete view of a corporation,
ratios are typically employed in conjunction. It is possible to determine which company is the
least hazardous or most alluring by using a certain ratio as a comparison tool for more than one.
Investors can also contrast a ratio for current data with historical outcomes obtained from the
same ratio to get a sense of prior success.

This text challenged me to know more about Ratios can be used by investors in a variety of
ways. Overall, financial ratios can offer a thorough overview of a company from several
perspectives and assist investors in identifying potential red flags.