Managerial Decision-Making Using Financial Ratios

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Managerial Decision-making using Financial Ratios MGMT640 Managerial Decision-making using Financial Ratios Abstract: Background: Financial statements allow stockholders and management to determine the financial health of a business. Using ratio analysis businesses can gain a snapshot of their durability compared to other companies within their industry. Managerial decision-making skills are a direct correlation on the financial wealth of a business, and can identify strengths and weakness within an organization. Results: Quantitative results are shown though using financial ratios and financial statements. The financial ratios can be divided between five core categories. These categories are: Liquidity, financial leverage, asset efficiency, profitability and market value. Conclusions: Ratio analysis enables business owners and management with essential information to make informative and sound business decisions. Additionally, these analyses will demonstrate trends within an organization and their industry. Though ratio analysis should not be used alone as there are several limitations in the usefulness of their data, they will give general historical information. Managerial decision-making should consider all factors in leveraging their position within their specific industry to excel and continue to generate positive revenue. Financial statements are the driving forces behind understandings a company’s financial position in the market place. Financial statements can effectively communicate what financial decisions have been made, how the bottom line was affected and what are the necessary steps to keep a company in business. Financial statements give the relative fiscal health over a period through interpretation; by identifying corporate strength and effectively examining overall managerial decision-making through ratio analysis. The
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