Requirements: APA | Essay | 4 pages, Double spaced
Answer preview
position of the business (Sayari & Mugan, 2017). The second users are the long-term lenders who give loans and expect settlement in the long run. Long-term lenders are interested in long-term solvency of the firm and assessment of the firm’s ability to pay timely interest. They are interested in solvency ratios such as debt equity ratios and interest coverage ratios because they show the ability of the firm to pay timely interest. The third one is the stockholders or the investors whose major concern is security of their funds in the business and returns on their investment. Investors are interested in earnings per share, return on equity and return on investment because these ratios show profitability and operational efficiency of the company. Management is another user of financial ratios (Musallam, 2018). Management focus on the growth aspect of the business and ensuring its smooth running of daily operations within the firm. They prefer activity ratios and profitability ratios such as fixed assets turnover ratios, net profit ratios and debtor’s turnover ratios because they help in evaluating and assessing the assets.
