NORTHCENTRAL UNIVERSITY ASSIGNMENT COVER SHEET

Learner: Ngoc Le Bao Tran THIS FORM MUST BE COMPLETELY FILLED IN Please Follow These Procedures: If requested by your mentor, use an assignment cover sheet as the first page of the word processor file. The assignment header should include the Learners last name, first initial, course code, dash, and assignment number (DoeJXXX00001) justified to the left and the page number justified to the right. Keep a Photocopy or Electronic Copy of Your Assignments: You may need to re-submit assignments if your mentor has indicated that you may or must do so. Academic Integrity: All work submitted in each course must be the Learners own. This includes all assignments, exams, term papers, and other projects required by the faculty mentor. The known submission of another persons work represented as that of the Learners without properly citing the source of the work will be considered plagiarism and will result in an unsatisfactory grade for the work submitted or for the entire course, and may result in academic dismissal.

BUS4003 Money, Banking and Business Finance

Candace Karsjens Activity7

<Add Learner comments here>

Faculty Use Only <Faculty comments here>

<Faculty Name>

<Grade Earned>

<Writing Score>

<Date Graded>

Ngoc Le Bao Tran Northcentral University Activity 7

Paper - Financial Analysis It is common knowledge that the financial analysis is very important for everyone, especially for business people since they have to understand and apply the information from the analysis to the business fact so that they can get profit and stay away from business risks easier. The financial analysis supplies the relative measures of the organizations conditions and performance. One good financial analysis can be in form of horizontal or vertical analysis. The horizontal analysis is very useful in evaluating the trend in the accounts over the year while the vertical analysis is used for disclosing the internal structure of the organization. The further study about the important elements in one financial analysis is very important. First of all, people should pay much attention to the types of ratios. In financial pect, they are the financial techniques that involve dividing many financial statement number into one another (Melicher & Norton, 2008). They are very useful in analyzing a firms financial performance. The performance is based on its income statements and balance sheets. There are five types of ratio: liquidity, asset management, financial leverage, profitability and market value ratios. Among them, the first four ones have relation to the information from the income statements and balance sheet of the company while the last one has relation to the stock market information from the financial statement items (Melicher & Norton, 2008). The first type, liquidity ratios, refers to the ability of the company to meet the due short-term obligations (Melicher & Norton, 2008). The asset management ratios indicate the extent to which the assets of the firm are turned over or used to support the sales (Melicher & Norton, 2008). The third one is the financial leverage ratios. This type mentions about the extent to which the borrowed or debt funds are used to the financial assets and the ability of the firm to meet the debt payment obligations (Melicher & Norton, 2008). The profitability ratios relates to the ability of the company in generating returns on its sales, assets and equity (Melicher & Norton, 2008). The last one, the market value ratios, indicates the investors willingness to value the company in the marketplace relative to the financial statement values (Melicher & Norton, 2008). The second financial issue for business people to care about is the Du Pont method of system of ration analysis. This method allows the business firm to generate a return on its assets because the method helps business firm offer low price and the low profit margins when it is searching for the high sales volumes on its products or it can help the firm sells high quality or special products at high prices and rely on the high profit margins to generate the returns in low sales (Melicher & Norton, 2008). Since the Du Pont method has relation to both the return on total assets and the return on total equity, it can be used to analyze the current situations of assets and equity of the firm. The return on total assets is very useful in examination the relationship