09class9A-126

09class9A-126 - Long-term solvency ratios Ratios relevant...

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1 1. Long-term solvency ratios Ratios relevant for long-term loans. Debt to Equity Ratio = Long-term debt/Shareholder’s equity. Low value is good from the debt holder perspective. Liabilities to asset ratio = Liabilities /Assets Low value is good. Operating cash flow to total liabilities ratio = Cash flow from operations/Average Total liabilities High value is good.
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2 From the book. Interest coverage ratio = (Net income + Interest expense + Income tax expense + Minority interest in earnings)/Interest Expense. Here Net income is usually taken to mean net income before extraordinary items. Return to what we learned with the Income Statement.
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3 INCOME STATEMENT Net Sales -Cost of Goods Sold =Gross Profit -R&D Expense =EBITDA (Earnings before interest, taxes, depreciation and amortization) -Depreciation and Amortization =EBIT (Earnings before interest and taxes) -Interest Expense +Non-Operating Income (loss) =EBT (Earnings before taxes) -Income Taxes -Minority Interest in Earnings
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09class9A-126 - Long-term solvency ratios Ratios relevant...

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