Liquidity Financial Ratio Review Exercise

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Liquidity Financial Ratio Review Exercise Understanding the meaning of financial ratios is imperative to different stakeholders both within and outside of a company. Management reviews different ratios to measure how effective the strategies used to run the business are within a given time period. Money Managers and other types of investors use ratios to determine investment strategies in different types of companies. The use of the ratios helps give a consistent look at different types of businesses whether large or small and determine profitability and return on equity. The purpose of this paper is examine liquidity ratios as applied to three companies and gain understanding of how the ratios studied disclose liquidity positions. Three types of Liquidity Ratios Liquidity for a company is “the ability of a firm to meet its near-term obligations as they come due” ( Walther, Financial Accounting, 2011, Chapter 4, p.57 ). Investors and creditors look at how liquid a company is in order to determine the company’s ability to meet it’s scurrent obligations. Three ratios to be considered are Working Capital, the Current Ratio, and the Quick Ratio. Three companies have been chosen and their Annual Reports as reported to the Securities and Exchange Commission (SEC) will be reviewed. A determination for each company’s liquidity position will be discussed based on the findings and compared to Management’s view as stated in the Annual Reports. The three companies chosen are Dell Inc., Genesco Inc., and ConAgra Foods Inc. Dell Inc. Dell Inc. is a manufacturer of personal and business computers with a global reach. They are located in Round Rock, Texas and have several manufacturing and customer services sites domestically and globall... ... middle of paper ... ...nage current assets to cover the current liabilities. All three ratios, when used together give a more complete analysis of the health of a company’s liquidity position. References US Securities and Exchange Commission, Form 10K, ConAgra Foods Inc., 2011. Retrieved from http://www.sec.gov/Archives/edgar/data/ 23217/000095012311066520/c64679e10vk.htm US Securities and Exchange Commission, Form 10K, Dell Inc., 2011. Retrieved from http://www.sec.gov/Archives/edgar/data/ 826083/000095012311025579/d78468e10vk.htm US Securities and Exchange Commission, Form 10K, Genesco Inc.,2009 Retrieved from http://www.sec.gov/Archives/edgar/data/ 18498/000095014409002839/g18346e10vk.htm#113 Walther L. M. (2010). Financial Accounting, dba/Principles of Accounting.com Walther L. M. (2010). Accounting Cycle Problem Workbook, dba/Principles of Accounting.com

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