Financial Condition Analysis Concerns - Essay Example

The paper "Financial Condition Analysis Concerns" is a good example of an essay on finance and accounting. There are several general problems that must be addressed in doing ratio analysis for government financial condition analysis. First, it is imperative to evaluate various income and cash flow statements that determine the government balance sheet in influencing performance. It means projects, budgets, and businesses are assessed according to their investment suitability. Second, while extrapolation of a company’s past and future performance is an integral part of ratio analysis, identifying the solvency and stability of such an enterprise demonstrates the ability to calculate not only ratios but also financial data (Finkler et al., 2013). There are, however, limitations of ratio analysis such as measurement of the aggregate economy and benchmarking that affect the measuring of profitability in companies. The phenomenon is influential especially in a larger analysis of asset values while analyzing the government’s financial statements annually. Overall, ratio analysis ensures that the formulation of fiscal questions sets a standard for calculating solvency ratios, funding ratios, and common-size ratios. 

I believe traditional solvency ratios adequately address financial condition analysis concerns in different sectors. For instance, in the health and not-for-profit organizations, financial management for the public requires a balance in the accounting data to increase profitability. It is because of the need to measure a company’s net worth also decreases most of the liabilities that double the debt (Fridson & Alvarez, 2011). Similarly, traditional solvency is limited by the rationale for covering decreased credit and costs ratio in the inclusion of net income without taxes to set a precedent of capital loan agreements. Therefore, in the evaluation of the Total Assets ratio against Total Debt, a firm’s assets must reflect the equity resources to balance the financial condition analysis. In other words, the risk involved should always come with capital requirements for helping investors and lenders. Read More