MBA - Comprehensive Exam - 3.pdf

# MBA - Comprehensive Exam - 3.pdf - 1 Having a Strategic...

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1) Having a Strategic Perspective, Global Dynamics of Worldwide Industries and New Markets. How changes affect organizations and understand the implications of the integrated business processes in managing the enterprise. 2) Have an ability to integrate decisions and solutions across disciplines in complex decision making environments. Demonstrate an understanding of the current business theories and practices. Select and use the appropriate research. 3) Having the ability to integrate knowledge of the core business functions to solve management problems. 4) Having a clear framework for ethical and value-based decision making.

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1 5) How to evaluate financial statements to support business decisions. Liquidity (Short-Term Solvency) Ratios a. It attempts to measure a firm's ability to pay its bills / obligations in the short run . A) Current Ratio = Current Assets Current Liabilities N.B.: A high current ratio is a good indicator if the company is a short-term creditor. However highly liquid assets are generally less profitable for the company .. N.B.: The higher the ratio, the better for the company. B) Quick Ratio (Acid Ratio) = Current Assets Inventory Current Liabilities N.B.: Quick Ratio of \$0.5 means that each \$1 of current liabilities is covered by \$0.5 of current assets without inventory. N.B.: The higher the ratio, the better for the company. C) Cash Ratio = Cash Current Liabilities N.B.: The higher the ratio, the better for the company. Financial Leverage (Long-Term Solvency) Ratios It attempts to measure a firm's ability to meet its long-term obligations , through showing the firm's ability to service debts. It is more closely related to the likelihood of default . Leverage Ratios: A) Total Debt Ratio = Total Debts = Total Assets Total Equity Total Assets Total Assets N.B.: The lower the ratio, the better for the company. B) Debt / Equity = Total Debts = Total Assets Total Equity Total Equity Total Equity N.B.: The lower the ratio, the better for the company. C) Equity Multiplier = Total Assets = Total Liabilities + Total Equity = 1 + Total Debts Total Equity Total Equity Total Equity N.B.: The lower the ratio, the better for the company.
2 Coverage Ratios: A) Times Interest Earned = EBIT Interest Expense N.B.: The lower the ratio, the better for the company. B) Cash Coverage = EBIT + Depreciation and Amortization Interest Expense Asset Management (Turnover Ratios) It attempts to measure a firm's ability to measure its assets to generate income . A) Receivables Ratios: Accounts Receivables Turnover = Net Sales Average Accounts Receivables N.B.: A/R is calculated as average, which is equal to [(Beginning A/R + Ending A/R) / 2] N.B.: Net Sales is calculated by the credit sales sales discounts sales returns and allowances. Days' Sales in Receivables (ACP) = 365 Accounts Receivables Turnover B) Inventory Ratios: b. A manufacture would consider inventory at cost and thus relate inventory to cost of goods sold.

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• Spring '17
• Balance Sheet, Financial Ratio, Group development,  Companies

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