17.4 buissness

ratio: how company campares liquidity, debts, profit and overall buissnces activity of other buissnesses in the same industry

1) liquidity ratio: how fast asset turns to cash.

1)current ratio (short term).

Current asset/Current liability

for every _$ of CA Company has 1$ of CL

2) Acid test ratio: (short term debt)

(Cash + accounts recievable + marketable securities)/ Current liability

0.5-1 good

less than 0.5 bad

2)Leverage (debt) ratio: how much they rely on debt.

Debt to owner equity: (debt it has to repay)

total liability/OE x 100% =_%

if decimal no need to add x100%..

if above loo = more debt.

3)profitability ratios: how good make profits. are resources used to.

1)earnings per share.

Net income (after tax)/Shares outstanding

2)return on sales.

Net income (before tax)/net sales x 100%.

3) return on equity.

Net income (after tax)/total o.E x 100%

4)Activity ratios:

inventory turnover:

Cost of goods sold/Avg. inventory

ratio: how company campares liquidity, debts, profit and overall buissnces activity of other buissnesses in the same industry

1) liquidity ratio: how fast asset turns to cash.

1)current ratio (short term).

Current asset/Current liability

for every _$ of CA Company has 1$ of CL

2) Acid test ratio: (short term debt)

(Cash + accounts recievable + marketable securities)/ Current liability

0.5-1 good

less than 0.5 bad

2)Leverage (debt) ratio: how much they rely on debt.

Debt to owner equity: (debt it has to repay)

total liability/OE x 100% =_%

if decimal no need to add x100%..

if above loo = more debt.

3)profitability ratios: how good make profits. are resources used to.

1)earnings per share.

Net income (after tax)/Shares outstanding

2)return on sales.

Net income (before tax)/net sales x 100%.

3) return on equity.

Net income (after tax)/total o.E x 100%

4)Activity ratios:

inventory turnover:

Cost of goods sold/Avg. inventory