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- Current Assets Current Liabilities
- - measure of liquidity - a company has sufficient liquid assets to cover its current obligations
- - the higher the ratio the better - if less than one can't pay bills
Return on Assets
- Net Income Ave. Total Assets
- - in %
- - measure of how well a company uses its assets to create profits
- -used by investors to evaluate company leadership
Return on Equity
- - as %
- - measures the success of a company's financing, investing, and operating activities
- - high return = sound investment
Debt to Equity Ratio
- Total Liabilities Total Liabilities + Equity
- - as %
- - the more outstanding debt a company has, the more its earnings must go to making the payments on this debt load.
- - the more debt a company carries, the more the company is effectively owned by its lenders
- Cost of Goods SoldAverage Inventory
- - measures the success a company has in turning inventory into sales
- - # of times a company sells and replaces its inventory during year
Average Days Sales in Inventory
- the number of days sales, on average that a firm carries in inventory
Acid Test Ratio = Quick Ratio
- Current Assets - InventoryCurrent Liabilities
- Stringent test that indicates whether a company has enough current assets to cover immediate liabilities w/o selling inventory
Accounts Receivable Turnover
- Sales Ave. Net Accts. Rec.
- the # of times accts. rec. are turned over or collected during the period
Average Collection Period
- # of days it takes on average to collect an account receivable
Book Value Per Share (Liquidation Value)
- Assets - Liabilites (OR Owners Equity)# of shares of C/S at the end of the year
- the dollar amount of equity that is associated with each share of stock
Prices Earnings Ratio
- Market Price per Share Earnings per Share
- tells you how expensive a share of stock is in relation to its earnings.
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