I calculated a few financial ratios this week that I found challenging and fascinating in equal measure. I was given a balance sheet to calculate rations, such as earnings per share, current ratio, return on equity, return on investment, debt to equity ratio, and acid test ratio. Additionally, the test required me to calculate debt to equity ratio using the data from the provided balance sheet. Some of the ratios that were challenging for me to calculate included acid test ratio and debt to equity ratios. The two ratios above were challenging because they involved the computation of several aspects before arriving at the final answer, which was time consuming. For instance, to calculate the acid test ratio, I had to compute the current liquid assets comprising marketable securities, cash equivalents and cash, non-trade receivables, and then dividing the sum of the latter by current liabilities ( Alamry, 2020) . The liquid asset elements were challenging to identify and I had to constantly refer to my notes to ensure I selected the accurate aspects. Ratios that were difficult to understand include the return on equity ratio and return on investment because of their constituents and terms used to describe them ( Warrad, 2015) . In the following weeks, I will ensure to read the financial elements taught in class on my own and to try computing ratios from other sources apart from the classroom materials provided. I will also consult my classmates who understand the financial concepts that challenge me for them to tuition me privately. I believe that if I inculcate the mentioned strategies, I will be better at calculating aspects from financial statements in the future.
References
Alamry, S. C. (2020). Analysis in Financial Statements (1st ed.). Al- Alalamia press Samawah. https://www.researchgate.net/publication/338385318_ANALYSIS_OF_FINANCIAL_STATEMENTS
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Warrad, L. (2015). Return on Asset and Return on Equity Effects of Net Operating Cycle: Jordanian Study. Research Journal of Finance and Accounting , 6 (14), 89-95. https://www.researchgate.net/publication/280614706_Return_on_Asset_and_Return_on_Equity_Effects_of_Net_Operating_Cycle_Jordanian_Study
