FINANCIAL STRUCTURE Essay Example | Topics and Well Written Essays - 1500 words

FINANCIAL STRUCTURE - Essay Example At this stage it becomes essential to address the question of weather financial structure matter for long-run economic growth? Several economists and policy-makers have tried to answer this question and have concentrated on the relative merits of intermediary- versus market-based financial systems. The debate is more than a century old and it commenced with reference to Germany and the United Kingdom in the late nineteenth and early twentieth centuries (Dolar and Meh, 2002). Financial Data and its Importance Financial data correspond to the existing results of the company's strategy and structure. Even though analyzing financial statements can be quite complex, a general idea of a company's financial position can be determined through the use of ratio analysis. Financial performance ratios can be calculated from the balance sheet and income statement. These ratios can be classified into five different subgroups: profit ratios, liquidity ratios, activity ratios, leverage ratios, and shareholder-return ratios. These ratios should be compared with the industry average or the company's prior years of performance. Profit Ratios Profit ratios are used to calculate the efficiency with which the company uses its resources. The more efficient the company, the greater is its profitability. It is useful to compare a company's profitability against that of its major competitors in its industry. In addition, the change in a company's profit ratios over time tells whether its performance is improving or declining.