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From the e-Activity, evaluate at least two companies’ financial statements that have received a negative rating...

From the e-Activity, evaluate at least two companies’ financial statements that have received a negative rating from one of the financial rating agencies. Determine which financial ratios most likely impacted the rating decision. Compare and contrast at least two financial ratios that support the rating agency's claims. Speculate on how the ratios are likely to change considering the economic environment in which it operates. Support your position.

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Answer: The financial statements of the two companies with a negative rating include Monsanto and Toshiba. Moodys changed the credit rating of Monsanto from neutral to negative due to its inability to develop strong financial systems to repay loans and value its biotechnology appropriately. In 2015, Toshiba was placed into credit watch and was given a negative credit rating due to the inability to grow profits and issues related to management and governance at the company (Pflug, Pichler & Wozabal, 2012). The financial ratios, which are likely to impact on the rating decisions includes the profit margin, current ratio and total assets turnover The two financial ratios supporting the rating agencys claims include current ratio and profit margin. Both ratios help in determining whether the companies can gain additional earnings and cash. The profit margin examines the ability of the organization to make profits, while, the current ratio measures the ability of the company to repay its debts. A growth in the economic environment such as growing disposable income would improve the profit margins as well as the current ratios of the company Created by Universal Document Converter

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