Acc 561 Week 3 Assignment Ratio Analysis

Week 3: Ratio AnalysisStudent NameInstitutional Affiliation8th March, 2018Ratio AnalysisThe primary reason for conducting an audit of the financial statement is to offer an independent guarantee that the management hasissued a “true and fair” presentation of the organization’s financial performance, health and position. Additionally, an independent audit of the financial statement gives the information provided some degree of reliability (Cheng, 2014), which the financial institution (White Sands Bank of Taos) could use; for instance, for its calculations and decision-making.Furthermore, conducting an audit of the financial statement regularly could help improve an organization’s value and credit rating (Cheng, 2014). This would go ahead to increase investor confidence on the organization as well as maintain financial institutions close byjust in case the organization might be in need of or want to borrow some unexpected money.Financial institutions, such as banks for instance, use credit scores in evaluatingindividuals’ loan applications, however, there are no such scores for businesses. Nonetheless, lenders considering extending credits to businesses evaluatevarious ratios computed from the respective companies’ seeking credit extensions, financial statements (Cheng, 2014). These financial ratios offer the lender the vital information concerning the business’ ability to meetits credit obligations (pay loans).The financial