Complete the Financial Analysis Simulation found in the Week #5 folder. Upon finishing the simulation, write a reflection (600 words) summarizing lessons learned…specifically what did the results of your decisions help you learn about financial ratios and metrics concepts? You should not simply report the decisions you made; you may report those, of course, but do so in the context of what the results caused you to learn about financial ratios and metrics concepts.
Last week I took a simulation assessment which gave me a lot of insight. I made some wrong decisions but it helped me learn something essential in making financial decision making. In the simulation analysis I made my decision based on net income in the income statement. I related my rationale on the current affairs affecting the world right now, which is the Corona Virus Pandemic. This pandemic has greatly affected almost all the companies in the world either positively or negatively. I have come to learn that the financial statements and the financial ratios are interconnected. It is not good to use only one line to make a financial decision. In my decisions I only used net income to make decision and I believe that is why all of them were incorrect. I understand that the amount of profit a company generates is not enough to help me make decision. Besides, profit alone is not a guarantee that the company is financially healthy.
There are other factors that I should have considered before making the decision. . For instant I could have checked the ratios. My perception was that the amount of net income is a reflection of the financial health of a company. However, to determine that the company is financially healthy one needs to consider all the financial metrics by analyzing the balance sheet, income statement, cash flow statement and finally conduct a financial analysis. My concept about making decision based on company’s financial health was good because having a clear picture of financial health can help you make more informed decisions about your organization’s direction and how resources are allocated. However, my approach was wrong and that made my decision to be also wrong. It is now true that all the financial metrics are interrelated and you cannot use one statement without considering another financial statement.
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