U2 DB2 Financial Ratios - 36752

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Financial ratios are important to the understanding of the financial health of a company. You and your colleagues work for a financial services firm. You are discussing the merits of the various financial ratios. Identify four financial ratios, and state what they tell you about a firm and why it is important to understand what these ratios mean to both a bank and an investor. Be sure to include your reasoning regarding these issues.

Discussion Board Assignment Guidelines:

  • Choose 4 different financial ratios from your text, course materials, and/or Web resources.
  • Answer the following questions:
    • What do they tell you about a firm?
    • Why is it important for a bank to understand these financial ratios?
    • Why is it important for an investor to understand these financial ratios?
Solution Description


Financial ratio is defined as the comparison of two or more numbers of the company’s financial statement; it helps to evaluate the company’s performance (Kelley). Of the multiple financial ratios, the following have been chosen for this discussion board:

Ø  Liquidity Ratios (“Financial statement analysis,”)

Ø  Profitability Ratios (Brooks, 2013)

Ø  Asset Management Ratios (Brooks, 2013)