Financial Analysis

631 WordsNov 9, 20103 Pages
Financial Analysis A Review of the Literature Nov 7 2010 Financial Analysis A Review of the Literature As the United States, along with most of the rest of the industrialized world, has been dealing with a strong and long lasting recessionary period since approximately October 2007, it has become very important that companies that are doing well be able to meet some industry method of showing strong economic standing in today’s environment. Many methods can be used to help investors assess the financial stability of an organization. Two of the most common methods are financial ratio analysis and profitability ratios. Financial Ratios Investors and other non-industrial users of financial information often utilize financial ratios as a measure to both the performance and financial health of an organization or company. By reviewing these ratios they can evaluate the success of the business, determine any weaknesses of the business, compare current and past performance, and compare current performance with industry standards. Besides up and coming industries, financially stable organizations are the most desirable companies to invest in as they successfully ensures its ability to generate income for investors and retain or increase value, through history reporting and consistency. An example would be: India's commercial banks have stable core revenues, sound profitability ratios and a low appetite for risk. But they often lack diversified earnings profiles. Public sector banks, in particular, have robust deposit bases and comfortable liquidity. (Fontanella,2009). Investing in this type of industry is safe for hedging against risky investing, but a downside would be less potential profit generation. Profitability Ratio Profitability ratios measure the profitability

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