Accounting Financial Statement Analysis

In: Business and Management

Submitted By DDAY
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Tomorrow's Products Internal Correspondence

To: Mr. T.J. Cerrillo

From: De'Lisa L. Davis

Subject: Companies Financial Statement Analysis BYP2-8

Date: September 17, 2013

Mr. Cerrillo, as the new Chief executive officer of Tomorrows Products, the Accounting Department would like to welcome you to the company. We would also like to stress how important it is for our company financial statements to be accurate as possible for our Board of Directors meetings at the end of every month. As the Chief Financial Officer, I would like to extend any help from the Accounting Department to assist you at anytime you feel you have any discrepancies in our statements. The owner brought to my attention in our last board of directors meeting that you were having minor issues with the reports; I want to setup a meeting with you to show you specific tools that you can use to analyze the companies financial statements. I would like to point out the three main ratio analysis we use for analysis of primary financial statements, the profitability, liquidity, and solvency ratios.

Profitability ratios measure the income or operating success of a company for a given period of time. For example, from the last income statement I emailed to you Wednesday, you will notice that the companies sales increased by net income decreased during the period. To evaluate the companies profitability we will use ratio analysis. The liquidity ratio measures the short term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. In this case you will use one liquidity ratio, current ratio, which is computed as current assets divided by current liabilities.

The current ratio is considered a more dependable liquidity. If we compare our companies current ratio in the same report I emailed, to our competitors The Future Products report, you…...

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