PART 1)  Statement of the Assignment: Please prepare a comprehensive list of financial ratios . Write a brief explanation...

80.2K

Verified Solution

Question

Finance

PART 1)  Statement of theAssignment:

Please prepare a comprehensive list of financial ratios . Writea brief explanation below each financial ratio, e.g. what does thefinancial ratio measures or what the significance of it is.

For example:

Current Ratio = Current Assist / Current Liabilities

Current ratio measures whether our current assets, ifliquidated, are sufficient to pay all of our current liabilities. ACR of 1.5, for example, shows that if we were to liquidate all ofour current assets, we will be able to cover 1.5x our currentliabilities, whereas a CR of 0.5 shows that liquidating our currentassets only covers half of our current liabilities.

THE FOLLOWING RATIONS ARE THE RATIONS I NEED. CAN I GET ANANSWER EACH ONE OF THEM. (EACH BULLET POINT) please explain eachration, its process and how each one of them it is used

  Asset management, Or turnover,measures

Receivables Turnover = sales / accountsreceivable

  • NWC turnover= sales / NWC

  • Fixed asset turnover = sales/ net fixedassets

  • Total asset turnover = sales/ total assets

  • Return on equity = net income / totalequity

  • EPS = net income/ Shares outstanding

  • PE= price per share / earning per share

  • Market to book ratio= market value per share / bookvalue per share

  • Enterprise value= total market value of the stock + bookvalue of liabilities – cash

  • EBITA Ration= enterprise value/ EBITDA

Answer & Explanation Solved by verified expert
4.4 Ratings (647 Votes)
Answer Liquidity Ratios to ascertain the ability of the firm to meet current obligations 1 Current Ratio CR This measures level ofCurrent Assets CA as number of times of current liabilities It indicates ability of the firm to meet current liabilities CL by liquidating its current assets Formula for CR CACL Or CA divided by CL 2 Quick Ratio or Acid Test Ratio This shows the level of cash and equivalents quick assets including bank balances short term investments etc as number of times of current liabilities and indicates ability for speedy liquidation of all current liabilities Because Current Ratio includes all Current Assets including those which may take time for realization like inventory receivables etc Solvency Ratio or Leverage Ratio or DebttoEquity Ratio DER This is the level of total outside liabilities TOL as number of times of equity funds or Tangible Net Wort TNW Formula is as follows DER TOLTNW Or TOL divided by TNW This indicates the level of borrowings visavis the promoters contribution and the degree of leveraging A maximum DER of 3 to 4 is considered good More than 4 indicates excessive borrowings with attendant    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students