FINANCE-ACCOUNTING-AUDIT-CHECKLIST-SLIDE-SM

FINANCE-ACCOUNTING-AUDIT-CHECKLIST-SLIDE-SM - Current ratio...

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11/18/15 Current ratio A liquidity ratio that measures a company's ability to pa A ratio of 2:1 is usually considered the benchmark, however, this may vary across industries. A ratio of less than one suggests that the company may not have sufficient resources to settle its short- term debt obligations if they fell due today. A ratio of 2:1 is usually considered the benchmark, however, this may vary across industries. A ratio of less than one suggests that the company may not have sufficient resources to settle its short- term debt obligations if they fell due today.
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11/18/15 Quick ratio An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. If quick ratio is higher, company may keep too much cash on hand or have a problem collecting its accounts receivable. Higher quick ratio is needed when the company has difficulty borrowing on short-term notes. A quick ratio higher than 1:1 indicates that the business can meet its current financial obligations with the available quick funds on hands. A quick ratio lower than 1:1 may indicate that the company relies too much on inventory or other assets to pay its short-term liabilities.
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11/18/15 Debt-to-Asset The debt to assets ratio (or debt to asset ratio) is an indicator of the proportion of a company's assets that are being financed with debt, rather than equity. A ratio under 1 means a majority of assets are financed through equity, above 1 means they are financed more by debt. Furthermore you can interpret a high ratio as a "highly debt leveraged firm".  Companies with high ratios are placing themselves at risk, especially in an increasing interest rate market. Creditors are bound to get worried if the company is exposed to a large amount of debt and may demand that the company pay some of it back.
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11/18/15 Debt-to-Equity It is a leverage ratio and it measures the degree to which the assets of the business are financed by the debts and the shareholders' equity of a business.
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