Accounting Essay Example | Topics and Well Written Essays - 250 words - 18

Accounting - Essay ExampleThis allows a realisation of how indebted a federation is for its operations. Profitability ratios reflect on how much profit the caller-out is earning based on its principal investment. More commonly, a breakeven point allows a tabulation of how much business the company needs to do to ensure that its start-up cost are met. Alternatively, the gross profit ratio reveals the expected profit outcomes resulting from the companys regular business operations. The liquidity ratios determine how resilient a company would be in case of deficit financing. The current ratio reveals how much liquidity the company has to deal with its outstanding liabilities. On the other hand, the liquidity index shows how quickly the company can turn its assets into liquidity, if need arises. Finally, activity ratios describe how well managed the company is. Typically, the accounts payable and accounts receivable turnovers reveal how actively the management is closing liabilities (Wahlen, Baginski, & Bradshaw,