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Assume this is your first day on the job as the new chief financial officer of...

Assume this is your first day on the job as the new chief financial officer of a midsize company. Identify the three key ratios that you would compute first as you begin to try to understand the financial status of the firm. Explain why you selected the three ratios that you did.

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Answer #1

Three key ratios I would look for in a mid size company will be-

1. Debt equity ratio- it is the ratio of overall debt to equity.It tells about the solvency status of company in nutshell.

2.Liquidity Ratios - These ratios emphasizes upon the the short term Liquidity of the company to pay off it's short term repayment.It reflects the probability of cash crunch in short term of liquidity is low.

3. Earning per share- This ratio is required to calculate the earnings of equity shareholders. It is a measure of the profitability of the company.

I selected the three ratios as I wanted to know the solvency if the firm, liquidity of the firm and the profitability of the firm .

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