The Importance of Financial Information

 

 

 

Liquidity

We can use the information to pinpoint cash shortages and to analyse our ability to ​meet our short-term debts as they fall due.

 

Profitability

 

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%)

 

Capital structure

 

We look at the long-term financial makeup of the firm. We can look at the relationship between owners’ equity and debt from outsiders.

 

Debtors

 

We can look at trends and the average level of debtors who owe us money due to a credit sales transaction.