Week three discussion questions Essay Example | Topics and Well Written Essays - 500 words

Week three discussion questions - Essay Example Also the analysis will help provide the direction, speed and also the extent of the trends. There are a number of different ratios that can be calculated from the financial statements of a company. The three most important ratios however, are the Liquidity, Profitability and Gearing ratios. The ratio analysis is of great importance, as it is the most effective method to estimate a firm’s performance and also compare it with that of its competitors and the industry on the whole. The long term viability of a company can be assessed from the ratios which indicate the overall performance, such as the asset turnover ratio, which measures how effectively the company has been utilizing its assets to generate sales. The other important measure is the gearing ratio which indicates the capital structure of the company and how effectively it has utilized its debt raising capacity. A company which has an optimum gearing ratio can be considered to be well positioned, or, geared for long term growth. It is imperative to note that though there are strong policies and strict procedures set up within a company, frauds do occur at times. Anonymous reporting hotlines are found to be effective reporting mechanisms. It is also important to keep a positive atmosphere, as very strict policies and internal controls might have adverse effects on employee motivation. Hence it is essential to carefully analyse the working conditions and the policies are to be set accordingly, so that both the objectives are achieved successfully. With the improvements in technology, it has become increasingly easier and effective for management to implement security programs and software within the organization. Software based on Benford’s law and surprise testing are also effective measures when carried out in a professional well planned manner. The most important thing to understand is a person’s base nature, in order to identity deception, fraud or a false statement. The most