MBA 503 Milestone 2 ratios (1).xls

MBA 503 Milestone 2 ratios (1).xls - KEY FINANCIAL...

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KEY FINANCIAL STATEMENT RATIOS rev. 3-19-2010 rev. Feb 2010 Liquidity ratios Example: A "2.0 to 1" ratio means that there is If current liabilities are rising faster Current Ratio Current Assets 2.0 to 1 $2.00 of current assets for every $1 than the current assets from which Current Liabilities in current liabilities, which suggests they must be paid, company could that short-term creditors can be become insolvent (unable to pay reasonably sure of being paid. its debts) and eventually bankrupt. Quick Ratio Quick Assets * 0.9 to 1 Indicates extent to which claims of If Current Ratio is OK, but Quick Ratio "Acid Test" Current Liabilities short-term creditors are covered by is low or declining, the cause may "quick" assets*. * Quick assets include Cash, Marketable Securities, and Accounts Receivable (excludes Inventory) Asset Management Ratios Number of times per year Accts Receivable 6.0 times receivables were generated Turnover Accounts receivable and then paid ("turned over") than credit terms (e.g., "30 days, net"), Avg Number of 60.8 days Number of days customers are then credit and collection policies may Days to Collect A/R turnover ratio taking to pay need to be strengthened. Number of times merchandise Inventory Cost of Goods Sold* 4.0 times items are sold and restocked Turnover Inventory* ("turned over") per year. outdated and possibly overstated Avg Number of 365 (days in year) 91.3 days Number of days inventory remains Days in Inventory Inv. turnover ratio unsold Debt (Leverage) (Long-term Solvency) Ratios Debt to Total Liabilities 0.50
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