fintest1sideA - LIQUIDITY The current ratio: Total Current...

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LIQUIDITY The current ratio: Total Current Assets ÷ Total Current Liabilities If the current ratio is less than 1 assets do not cover liabilities Acid test (quick) ratio (Total Current Assets – Inventory) ÷ Total Current Liabilities A more stringent test than the current ratio Solvency Ratio Net Worth ÷ Total assets Net Working Capital Current Assets – Current liabilities FIRM VALUE Market Value (Publicly Traded Company) Price per share of stock X number of outstanding shares Book Value Total Assets – Total Liabilities Look Familiar? It’s Owners’ equity or Net worth Note: The replacement cost of an asset may exceed its book value Book value per share: Net worth ÷ Outstanding Shares ACTIVITY Total Asset Turnover Ratio Revenues ÷ Total Assets Are assets effectively generating sales? The bigger the ratio the better Inventory Turnover Ratio Cost of goods sold ÷ (average) inventory How many times per period is inventory bought and sold? Receivables Turnover Ratio Total Revenues÷ Average Receivables Average Collection Period Days in period ÷ Receivables Turnover Ratio These give an indication of how quickly the
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This note was uploaded on 04/17/2009 for the course FINA 3000 taught by Professor Laplante during the Spring '08 term at University of Georgia Athens.

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