ration analysis favorable unfavorable

current ratio goes up fav/unfav

An increase in the current ratio is generally viewed favorably as it indicates improved liquidity and a stronger ability to meet short-term obligations. However, if the ratio rises excessively, it may suggest inefficient use of assets.

acid-test ratio goes up fav/unfav

An increase in the acid-test ratio is typically seen as favorable since it reflects a company's enhanced liquidity position, allowing it to cover its current liabilities without relying on inventory sales. However, a significantly high ratio may indicate an underutilization of assets.

accounts receivable turnover goes up fav/unfav

An increase in accounts receivable turnover is generally considered favorable as it signifies that a company is efficiently collecting its receivables, leading to improved cash flow. However, an excessively high turnover may indicate overly strict credit policies that could limit sales.

inventory turnover goes up fav/unfav

An increase in inventory turnover is generally viewed favorably as it indicates that a company is efficiently managing its inventory and converting it into sales. However, a very high turnover rate may suggest insufficient stock levels, potentially leading to missed sales opportunities.

days’ sales uncollected goes up fav/unfav

An increase in days' sales uncollected is typically viewed as unfavorable because it indicates that a company is taking longer to collect payments from customers, which can negatively impact cash flow. However, it may also reflect more lenient credit terms to boost sales.

days’ sales in inventory goes up fav/unfav

An increase in days' sales in inventory is generally considered unfavorable as it suggests that a company is holding onto inventory for a longer period, which can tie up cash and indicate inefficiencies in inventory management. However, it may also reflect a strategic decision to hold stock in anticipation of increased demand.

total asset turnover goes up fav/unfav

An increase in total asset turnover is generally viewed favorably as it indicates that a company is utilizing its assets more efficiently to generate sales. However, a very high ratio may suggest that the company is under-investing in assets, which can hinder future growth.

debt ratio goes up fav/unfav

An increase in the debt ratio is typically viewed as unfavorable because it indicates that a company is relying more on debt to finance its assets, which can increase financial risk. However, it may also reflect a strategic use of leverage to fuel growth.

equity ratio goes up fav/unfav

An increase in the equity ratio is generally considered favorable as it indicates that a larger portion of a company's assets are financed by equity rather than debt, suggesting lower financial risk and greater financial stability. However, a very high equity ratio may indicate underutilization of leverage for growth.

debt-to-equtiy ratio goes up fav/unfav

An increase in the debt-to-equity ratio is generally viewed as unfavorable because it indicates a higher proportion of debt relative to equity, suggesting increased financial risk. However, it can also indicate a company's strategic decision to leverage debt for growth opportunities.

times interest earned goes up fav/unfav

An increase in the times interest earned ratio is generally considered favorable as it indicates that a company has a greater ability to meet its interest obligations, suggesting lower financial risk and improved financial health. However, an excessively high ratio may imply that the company is not taking full advantage of potential debt financing for growth.

profit margin ratio goes up fav/unfav

An increase in the profit margin ratio is generally considered favorable as it indicates that a company is retaining more profit from its revenues, suggesting improved operational efficiency and profitability. However, a very high profit margin could also indicate that the company is not investing enough in growth opportunities.

gross margin ratio goes up fav/unfav

An increase in the gross margin ratio is generally viewed as favorable because it indicates that a company is retaining a larger portion of revenue after accounting for the cost of goods sold, suggesting better cost control and profitability. However, excessively high gross margins may suggest underinvestment in product development or marketing.

return on total assets goes up fav/unfav

An increase in the return on total assets (ROTA) ratio is generally considered favorable as it indicates that a company is generating more profit from its total assets, suggesting improved efficiency in asset utilization. However, an excessively high ROTA may indicate that the company is not investing adequately in its assets for future growth.

return on common stockholders’ equity goes up fav/unfav

An increase in the return on common stockholders’ equity (ROE) is generally seen as favorable because it indicates that a company is generating more profit for its shareholders, reflecting effective management and strong financial performance. However, an excessively high ROE could suggest that the company is relying too heavily on debt, which may increase financial risk.

basic earning per share goes up fav/unfav

An increase in basic earnings per share (EPS) is generally considered favorable as it indicates that a company is generating more profit per share of common stock, suggesting improved profitability and value for shareholders. However, an excessively high EPS might result from share buybacks rather than genuine earnings growth.

average total assets

(total assets current year+ total assets previous year)/2

Cost of Goods sold

Beginning inventory+ purchases -ending inventory

Cost of Goods Sold (COGS) is calculated as the sum of beginning inventory and purchases, minus ending inventory, representing the total cost of manufacturing or purchasing the goods that a company sold during a specific period.

net income

revenue- expenses

net sales

gross sales- returns-allowences-discounts

average accounts receivable

beggining ACR+ending ACR /2

interest expense

principle*rate*time

average common stockholders equity

begging+ ending / 2