Pick an area of interest to you (production, AR, sales, financial statements, et
ID: 467902 • Letter: P
Question
Pick an area of interest to you (production, AR, sales, financial statements, etc). Select a financial ratio that is commonly used in the area you selected. First locate it on a NetSuite dashboard. Describe where you located the ratio (screenshot may help). Present the ratio, describe it, and explain how it is calculated. Check the ratio by performing a manual calculation using the most recent balance sheet and income statement. Should you have any discrepancies, simply consider what might cause them and explain your thinking to us
Explanation / Answer
ratio gives or interprets relationship between two accounting numbers in any particular year to know or evalute the firms financial position. it is the simpliest form of evaluation.
for this discussion i am taking current ratio- which disclose the relationship between current assets and current liabiliites. the optimum level of this ratio is 2:1, it means the firm should have 2 units of current assets for its every unit of current liability. the motive behind this is the functioning of the firm without having any liquidity problems.
to calculate this we should know the value of current assets and total current liabilities. these two items can be find in the balance sheet of a firm. there wont be any discripancies in calculation of these.