Analysikg Corporate Financial Statements

Question 0

Explain the importance of liquidity

Answer 0

Liquidity is the capacity of s firm to generate the cash needed to meet financial obligations when then fall due.

Question 1

Explain the information needs of users.

Answer 1

Users of financial info vary in what they require from financial reports.
Financial reports may not always provide specific info of a particular group.

Question 2

How is debt a form of funding?

Answer 2

Borrowing money for business purposes is financially responsible, however excessive debt may lead to loss of liquidity and profitability.

Question 3

Explain how profitability is a a measure of business success.

Answer 3

Allows comparison of different businesses or time periods as a useful tool for investment decisions.
Size and security of returns for equity investors and lenders.

Question 4

How is efficiency a measure of business success?

Answer 4

Allows user to compare different businesses or time periods as a measure of how effectively the business has been in utilising its assets.
Leading to improvements in profitability.

Question 5

How are market ratios used to measure success of a business.

Answer 5

Reliable comparison between alternative investments