Business Administration 2257 Chapter Notes - Chapter 3: Finished Good, Profit Margin, Asset Turnover

• School: Western University
• Department: Business Administration
• Course: Business Administration 2257
• Professor: J S

Document Summary

Used to evaluate the financial performance and condition of a business enterprise. For external users: creditors, input into ending decisions, potential shareholders, make investment decisions. For internal users: managers, make a variety of operating decisions and financing decisions. Evaluates the financial performance and condition of a business by measuring progress towards goals. Primary goals are to earn a satisfactory return on investment, maintain a sound financial position and experience growth over time. Profitability and investment utilization are associated with return on investment. Liquidity and stability are the key elements of financial position. Good returns compensate investors for the use of their capital / risk of their investment. Fundamental to the existence and survival of every firm. Refers to the effective use of assets. The greater the amount of activity in a business, the more investment required. Too much investment = excess funds will be unproductive. Proper balance should exist between sales and various asset accounts.