The Importance of Financial Information
We can use the information to pinpoint cash shortages and to analyse our ability to meet our short-term debts as they fall due.
This is a measure of the efficiency of the organisation and Return on Capital Employed is the best guide and is compared with the return from risk free investments (3%)
We look at the long-term financial makeup of the firm. We can look at the relationship between owners’ equity and debt from outsiders.
We can look at trends and the average level of debtors who owe us money due to a credit sales transaction.