Company’s Financial Performance
Ratio analysis is an essential tool. Profitability ratio and debt management ratios are important in identifying financial performance of the company. From the financial records the company is able to acquire a comprehensive record on its performance financially. It is from those records that the company is able to examine the current state in the aim of defining future expectations (Orlitzk & Rynes, 2013). Capital structure in an organization entails the ability to raise funds in an organization. There are different risks that face capital structure like poor markets that lead to losses in the company and also too much debts that may lead to the closure of the company.
Every company faces competition on one way or another from a different company selling similar products. Effective competition should be carried out by ensuring that companies are producing unique and quality products that will fetch good market. Markets are limited thus need to ensure there that the company gives the best. When a company has debts, it is important to ensure that there is huge profit realization that will support the company as well as pay off the debts. Working capital need to be accounted for at the end of the day to reduce misuse.
Financial statements help the company to identify the general performance. If the profit realized is higher than the expenditure then the performance is good (White, Sondh & Fried, 2015). When the company is doing well financially all the activities are run smoothly and the company is debt free. When the financial position is bad then there is too much pressure in the company as well as debts. Finally, leadership performance also plays a crucial part in ensuring that the company’s activities run smoothly.
Orlitzky, M. & Rynes, S. L. (2013). Corporate social and financial performance: A meta-analysis. Organization studies, 24(3), 403-441.
White, G. L., Sondh, A. C., & Fried, D. (2015). Analysis of Financial Statement. Analysis.