Account Formular 1. Risk: Short-term liquidity ratios 1.1 Current Cash Debt Coverage Ratio = Net Cash Flows From Operations Average Current Liabilities 1.2 Current Ratio = Current Assets Current Liabilities 1.3 Quick Ratio = Cash+Marketable Securities+Net A/R Current Liabilities 1.4 Average Collection Period = Avg. A/R * 365 Net Credit Sales 1.5 Inventory Turnover = Costs of Goods Sold Avg. Inventory
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Easy: Ratio analysis Answer: a Diff: E [i]. Ratio analysis involves a comparison of the relationships between financial statement accounts so as to analyze the financial position and strength of a firm. a. True b. False Liquidity ratios Answer: b Diff: E [ii]. The current ratio and inventory turnover ratio measure the liquidity of a firm. The current ratio measures the relationship of a firm's current assets to its current liabilities and the inventory turnover ratio measures
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Liquidity is defined as the degree to which an asset or security can be bought or sold in the market without affecting the asset price. Assets that can be quickly bought or sold are known as liquid assets. The most common financial ratio used when analyzing a company’s liquidity is current ratios. (Roth, n.d.). Current Ratio The current ratios is a popular financial ratio used to test a company’s liquidity by deriving the proportion of current assets available to cover
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aims to find out the impact of working capital policies on profitability. Return on assets is used as a measure of profitability. Current assets to total assets ratio is used to compute the investment policy of working capital management and to determine financing policy of working capital management current liabilities to total assets ratio is used. Other variables that are used in this study are quick ratio, debt to equity ratio and size of the firms. Secondary data of 117 textile firms listed on Karachi
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Alaska Sea Grant Marine Advisory Program The Business of Fish Handout 6 Analyzing Your Financial Ratios Taken from http://www.va-interactive.com/inbusiness/editorial/finance/ibt/ratio_analysis.html Overview Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's
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82 Part 2 Fundamental Concepts in Financial Management Table IC 3-3 Statement of Stockholders’ Equity, 2008 COMMON STOCK Shares Amount $460,000 Retained Earnings $ 203,768 (160,176) (11,000) (171,176) $ 32,592 Total Stockholders’ Equity $663,768 Balances, 12/31/07 2008 Net Income Cash Dividends Addition (Subtraction) to Retained Earnings Balances, 12/31/08 100,000 100,000 $460,000 (171,176) $492,592 Table IC 3-4 Statement of Cash Flows, 2008 ($160,176) 116,960 378
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Margin * Total Asset Turnover * Equity Multiplier Net Income = Net Income * Total Revenue * Total Assets Total Equity Total Revenue Total Assets Total Equity 1,218,000 = 1,218,000 * 28,613,000 * 9,869,000 2,118,000 28,613,000 9,869,000 2,118,000 = 4.25% * 2.899 * 4.65 =.575 or 57.5% Industry Average: ROE =3.8% *2.1 * 3.2 Industry Average ROE= 25.5% The total margin and total asset turnover combined equal the return on assets ROA. In the
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was met by comparing the risk of different companies, their rate of return, future trends and their strengths and weaknesses. In the theoretical section of the thesis different factors affecting the capital market were discussed, with the focus being on the risks of an investment. Basic financial statements and ratios were discussed briefly. Next cross sectional and time series techniques to compare the financial statements and ratios were revealed. Most of the information from the theories was later
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10 RATIOS YOU MUST KNOW Liquidity Ratios Current (working capital) ratio Acid-test (quick) ratio – Cash flow liquidity ratio Accounts receivable turnover Number of days’ sales in accounts receivable Inventory turnover – Total assets turnover 651 10 RATIOS YOU MUST KNOW Equity (Long-Term Solvency) Ratios Equity (stockholders’ equity) ratio – Equity to debt 10 RATIOS YOU MUST KNOW Profitability Tests – Return on operating assets Net income to net sales (return on sales or “profit
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Lecture Handouts for Chapter 5 Chapter 5 is covered in lectures 31 and 32. Risk and Return The return from an investment is the change in market price, plus any cash payments received due to ownership, divided by the beginning price. The risk of a security can be viewed as the variability of returns from those that are expected. Measurement of Risk The expected return is simply a weighted average of the possible returns, with the weights being the probabilities of occurrence. The conventional measure
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