Financial Statement and Operating Indicator Analysis Essay

Financial Statement and Operating Indicator Analysis - rise ExampleThe current ratio is a liquidity ratio and indicates the extent to which an plaque can polish off its short term liabilities by its liquid assets. It is calculated by dividing the total current assets in the governing with the total current liabilities.This ratio seeks to examine the revenue of the organization as a function of its expenses. It includes the revenues of the organization from all sources in its calculation. The ratio is usually derived by dividing the net income of the organization with the total revenue. A mellow ratio means that the organization can cater for its costs efficiently, and indicates profitability. On the other hand, a set down ratio indicates that an organization could be experiencing financial difficulties, and may not have the ability to give workable returns to investors (Chandra, 2010).A major challenge concerned with financial statement compendium relates to the inability of t he statements to recognize the seasonal soft changes, which occur in the course of normal business. These changes include changes in management, government policies, as well as labor strikes. Such changes affect the financial position of the business, thus including them in the financial analysis is significant. Therefore, users of analysis should require financial analysts to assess the implications of such factors on the organizations profitability, and report to them (Foundation of the American College of Healthcare Executives, 2008).