Ch. 3 Assignment.doc - Ch 3 Assignment Wendy Parwana 1 For...

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Ch. 3 Assignment Wendy Parwana 1) For short-term lenders they would be interested in liquidity ratios more because they are interested with the company's ability to pay their short-term obligations when they are due. For long-term lenders they would be interested in leverage rations because they are interested with how the company's debt to total assets is and that if the company is profitable that way interest payments are made. For stockholders they would be interested in the debt utilization, profitability and liquidity ratios because they are mostly concerned with the return on their investments and the company profits and they are ultimately the owners of the company. 2) The Du point system breaks down returns by assets by calculating Net income/Total assets. Which is used to evaluate the impact of the profitability and asset turnover of the company on the overall return on assets. Return on Assets = Profit Margin X Asset Turnover The return on equity is influenced based returned on the company's assets and/or the debt to asset ratio.
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