I would like to work with an organization dealing with food and beverages. As a financial manager, I am aware that it is important to the organization’s performance regularly to ensure success. Analyzing the operational and financial condition of the business would help me determine where changes or improvements are required. I would easily use the financial ratios to gather performance information of the organization.
First, I would use liquidity ratios to indicate the ability of the organization to cope with short-term financial commitments, comprising short-term debt. I would calculate the ratio by comparing the liquid assets of the organization against the present short-term liabilities. In case the business has high coverage, it has a greater capacity to manage short-term debt. On the contrary, less coverage would mean that it has less ability to cope with any short-term debt. Therefore, I would ensure that the company has a higher coverage to ensure its success. I would ensure that there is no trouble or impact on day-to-day operations.
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I would ensure the organization’s success by using the leverage ratios to indicate its long-term health. With this, I could indicate the amount of capital the business gets from debt, such as credit and loans. Thus, I would determine the ability of the organization to meet long-term financial needs (Barnes, 2007). The leverage ratios would be vital to help me illustrate how much the organization depends on the mixture of equity and debt to maintain operations. I would ensure that it is on the right track in terms of handling long-term financial needs and upholding daily food and beverage operations.
Moreover, as a financial manager, I would make good use of profitability ratios. They will help me to understand the ability of the organization to generate income against cost in a certain period. The profitability ratios will reveal how good the business is making using its food and beverages to make a profit. I would be able to determine the month, quarter, or year in which the business is profitable or not and know how best to handle the issue. During the profitable period, the company can aim at increasing activities to generate more profit (Rist & Pizzica, 2014). I will assess the return on equity, return on assets, and profit margins closely.
Finally, I would check the asset management ratios. That way, I would determine how the organization generates sales using its sales. The information given by these numbers would be vital in providing me with insight into the success of the inventory management and credit policy of the organization. It would help me to make decisions on how the business can be successful by making more sales.
References
Barnes, P. (2007). The analysis and use of financial ratios. Journal of Business Finance and Accounting , 14 (4), 449-461.
Rist, M., & Pizzica, A. J. (2014). Financial ratios for executives: How to assess company strength, fix problems, and make better decisions . Apress.
