TWO PARTS PROBLEM

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

Profitability measures

• Profit margin = Net income/ sales

• Return on Assets= Net income / total assets

• Return on equity = net income / totalequity

Market Value Measures

• 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

PART 2)

Select one of the financial ratios LISTED BELOW . Writethe formula for calculating it, and then explain how it is usefulin analyzing the financial health of the firm.

How would you use the ratio, how would you assesswhether it is at an appropriate level or if it should be improved,and if so, how would you improve it?

Short-term solvency, or liquidity, measures

• Current ratio = current assets/ current liabilities

• Quick ration = Current assets – inventory / currentliabilities

Other liquidity Ratios

• Cash ratio = Cash/ Current Liabilities
• Net Working Capital to Total Assets = Net working Capital /Total Assets
• Interval Measure= Current assets / Average daily operatingcosts

Long term Solvency Measures

• Total assets – total equity / total assets
• Debit- equity ratio = total debt / total equity
• Equity multiplier = total assets / total equity

• Long term debt ratio = long term debt / long term + totalequity

• Tomes interest earned ratio = EBIT / Interest
• Cash coverage ratio= EBIT + Depreciation / interest

Asser management, Or turnover, measures

• Inventory turnover = Cost of goods sold / inventory
• Receivables Turnover = sales / accounts receivable

• NWC turnover= sales / NWC
• Fixed asset turnover = sales/ net fixed assets
• Total asset turnover = sales/ total assets

Profitability measures

• Profit margin = Net income/ sales
• Return on Assets= Net income / total assets
• Return on equity = net income / total equity

Market Value Measures

• EPS = net income/ Shares outstanding
• PE= price per share / earning per share
• Market to book ratio= market value per share / book value pershare
• Enterprise value= total market value of the stock + book valueof liabilities – cash
• EBITA Ration= enterprise value/ EBITDA