a304 equations

Working Capital

measures the dollar amount of short-term resources available after paying off any current obligations

Current Ratio

indicates how many dollars of current assets the company has for every dollar of current liabilities

Acid Test Ratio

excludes inventory and prepaids to show the firm’s ability to meet short term obligations with its most liquid assets

Solvency Ratios

these types of ratios assess long term financial stability and reliance on debt financing, observing a company’s overall risk profile

Debt to Equity Ratio

shows how much financing comes from creditors vs owners (higher value —> more risky)

Times Interest Earned Ratio

measures how many times earnings can cover interest payments (higher value —> less risky)

Profitability Ratios

these ratios suggest efficient use of shareholder funds to generate earnings

Return on Equity

measures the ability of management to generate earnings from the resources the owners provide

Earnings per Share

measures NI earned per share of common stock

Market Performance Ratios

these ratios show investor confidence and growth expectations

Price-Earnings Ratio

indicates how the stock is trading relative to its current earnings

Dividend Yield

measures how much a company pays out in dividends relative to its share price

Cash Return on Assets

measures the operating cash flows generated per dollar of assets

Cash Flow to Sales

measures the operating cash flows generated for each dollar of sales

Free Cash Flows

measures the available cash flows for discretionary spending