Task 1: Reading and Understanding Financial
Statements
Course: Financial Management for IT Professionals — C928
Date: 08/04/2024
, A. See attached both completed Figures A1.1 (Income Statement) and A1.2
(Balance Sheet)
B. Analyze the current ratio measure of liquidity for Sparkit:
1. In order to determine financial well-being within a company it is
necessary to have a full view of a company’s liquidity. “Liquidity means
the extent to which a business has cash and other assets that could
readily be turned into cash” (Blackstaff, 2012). Management in general
should understand what liquidity means, how it is calculated and how it
affects the company. To determine liquidity, it is done via two ratios via
the current ratio- current assets and liabilities. The current assets
essentially fund current liabilities.
The Sparkit financial manager and CIO must know the company’s
Current Ratio to be able to set budgets for each department. Without
this knowledge, the company can potentially over budget or under
budget which can negatively impact the financial statement affecting
not only the company but also stakeholders. Utilizing this information
will help both the financial manager and CIO understand the overall
performance of the business and have the ability to compare year over
year.
2. Sparkit’s CIO and IT manager must understand the current ratio to
ensure that any new projects can be adequately funded without
bringing the company into the red (debt). This in turn can influence the
decisions made by the IT department. The Current Ratio must be in
good standing for there to be enough cash to be able to put towards
projects for the organization.
The goal is to have a high current ratio, this means Sparkit would
have enough cash to fund a project. The higher the ratio the more
qualified the business is to pay off the liability/debt. Ensuring the ratio
is high will then indicate good financial health of the company. Having
this knowledge by the CIO and IT management team will allow them to
make better decisions on projects and their agenda while maintaining
the company’s financial health and not going over budget.
3. Provide the current ratio values for Fiscal Year 2 from Figure A1.2:
Statements
Course: Financial Management for IT Professionals — C928
Date: 08/04/2024
, A. See attached both completed Figures A1.1 (Income Statement) and A1.2
(Balance Sheet)
B. Analyze the current ratio measure of liquidity for Sparkit:
1. In order to determine financial well-being within a company it is
necessary to have a full view of a company’s liquidity. “Liquidity means
the extent to which a business has cash and other assets that could
readily be turned into cash” (Blackstaff, 2012). Management in general
should understand what liquidity means, how it is calculated and how it
affects the company. To determine liquidity, it is done via two ratios via
the current ratio- current assets and liabilities. The current assets
essentially fund current liabilities.
The Sparkit financial manager and CIO must know the company’s
Current Ratio to be able to set budgets for each department. Without
this knowledge, the company can potentially over budget or under
budget which can negatively impact the financial statement affecting
not only the company but also stakeholders. Utilizing this information
will help both the financial manager and CIO understand the overall
performance of the business and have the ability to compare year over
year.
2. Sparkit’s CIO and IT manager must understand the current ratio to
ensure that any new projects can be adequately funded without
bringing the company into the red (debt). This in turn can influence the
decisions made by the IT department. The Current Ratio must be in
good standing for there to be enough cash to be able to put towards
projects for the organization.
The goal is to have a high current ratio, this means Sparkit would
have enough cash to fund a project. The higher the ratio the more
qualified the business is to pay off the liability/debt. Ensuring the ratio
is high will then indicate good financial health of the company. Having
this knowledge by the CIO and IT management team will allow them to
make better decisions on projects and their agenda while maintaining
the company’s financial health and not going over budget.
3. Provide the current ratio values for Fiscal Year 2 from Figure A1.2:
