Do my financial ratios discussion and reply to quentin and edwards

My Financial Ratios Discussion:

Referencing this week’s readings and  lecture, what are the limitations of financial ratios? Classify your  answer into at least the following categories: liquidity ratios,  activity ratios, leverage ratios, and profitability ratios.

Respond to at least two of your classmates’ posts.

Quentins Discussion Reply and include sources provided:


According  to our weekly lecture, Cain defined the following four ratios, namely  liquidity ratios, which “help determine whether a company is liquid  enough to cover up its current liabilities.” Activity ratios “establish  how a company makes use of its resources through comparison of certain  activities.” Leverage ratios “establish the level of debt owed to  creditors by a company and whether such a company is in a position to  pay its long-term liabilities.” Lastly, profitability ratios “establish  whether it is operating at a profitable level and measure the success of  the company in the industry” (Cain, 2018, Week 6 Lecture).

The limitations of these financial ratios vary depending on the type  of ratio presented. For the liquidity ratio, limitations may rise due to  the fluctuation of sales at certain times of the year. Activity ratios  may experience a type of constraint due to the late customer payments  and also seasonal sales being higher than others. Leverage ratios  experience issues when debt is too high being that the debt still has to  be paid at some point. For profitability ratios also depend on whether  or not companies can pay their debts and how much profit is being  generated. Other limitations include inaccurate data on statements,  times of inflation, and fixed assets at cost (Epstein, 2014).

Cain, M. (2018). Week 6 Lecture. Retrieved from

Epstein, L. (2014). Financial decision making: An introduction to  financial reports [Electronic version]. Retrieved from

Edwards Discussion reply and use sources in reply:


While  financial ratios can be used to access a company’s performance in  regards to their financial health, they have multiple limitations that  can prevent an analyst from getting a full examination. Liquidity ratios  for instance may be used by a financial institution when they are  determining whether the borrower has enough cash flow to pay of current  debt. However, using a liquidity ratio would get inaccurate results if  the company measured their performance multiple times a year because the  numbers could fluctuate. Activity ratios can be used by an analyst to  see how much of a company’s assets can be converted into cash. However,  “assets are valued at cost and may not reflect the current market value  of assets which can distort ratios that use asset values, especially  when comparing a company with primarily older assets to a company just  starting up” (Epstein, 2014, p. 6.2).

Profitability and leverage ratios are used to determine how  money a company makes and how much capital they have but they are  inefficient if a financial analyst is looking for future projections.  Not to mention that all the financial ratios mentioned will have  inadequate results if the company only has high level performances  during peak seasons. A company that sells lawn equipment will have peak  sales during the warms but will have low sales when it gets cold.  Conclusively, all financial ratios would be difficult to use if a  company sells items in different industries because it would be too hard  to analyze what other corporations to deploy for products sold  comparison. 


Dobosz, J. (2013). Ten ratios to make you money in stocks. Forbes. Retrieved from (Links to an external site.)Links to an external site.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Get 15% OFF on your FIRST order. Use the coupon code: new15