Sample Essay

Asset utilization ratios provide measures of management effectiveness. They serve as a guide to critical factors concerning the use of the business assets, inventory and account receivable collections in day to day operations. A similar measure is the fixed asset turnover.

Leverage Ratios provides measure of the business use of debt financing. They are used extensively by analysts outside Barclays and Vodafone to make decisions concerning the provision of new credit or obtaining additional credit. The total debt ratio is also used to measure firm’s debts. Liquidity ratios on the other hand indicate the ability of Barclays and Vodafone to repay short term debts. The current and quick ratios are used to measure firm’s liquidity ratios.

Finally, the performance of Barclays and Vodafone can only be measured from the financial ratios of the two. The leverage ratio of both the two companies indicates the level of debt. On the other hand, profitability ratios indicate the viability of the business and the possible return on investment from shareholders. On the other hand, balance sheet of the two firms is necessary in giving the investor information on the financing structure of the two firms and hence the financial stability of the business. I hope you have gained an insight about the financial statements. However, in case of any questions please feel free to contact me on e-mail or phone.

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