Question

1) Statement of the Assignment:

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

For example:

Current Ratio = Current Assist / Current Liabilities

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

THE FOLLOWING RATIONS ARE THE RATIONS I NEED. CAN I PLEASE GET AN ANSWER EACH ONE OF THEM. (EACH BULLET POINT)

• Total debt Ratio=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 + total equity

• Times interest earned ratio = EBIT / Interest

• Cash coverage ratio= EBIT + Depreciation / interest

  Asset 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 per share

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

• EBITA Ration= enterprise value/ EBITDA

2)

Select one of the financial ratios listed.   Write the formula for calculating it, and then explain how it is useful in analyzing the financial health of the firm.

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

Answer 1