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Unformatted text preview: Case 1 1. Stock prices change every day because of market forces. By this we mean that stock prices change because of supply and demand. The most important factor that affects the value of a company is its earnings. Stock Prices are adjusted if there was a stock dividend during the year. Higher dividend paid in 2004 Increased competition in the market Although the earnings available for common stock holder had increased from the past year but the net profit margin had decreased. Net profit margin: 2003: 124700.3/1678894 = .074 2004: 143100/2050000= .069 2. Liquidity is the firms ability to satisfy its short-term obligations as they come due: Liquidity Ratios 2003 2004 Current ratio 890000/355000=2.51 1848450/895000=2.06 Quick ratio (890000-650000)/355000=. 67 (1848450- 1300450)/895000=. 61 Cash Ratio 40000/355000=0.11 5000/895000 = 0.00055 In 2003 the company had a higher current ratio, which shows that the company was more liquid in that year. In quick ratio, the inventory is taken out since its the least liquid current asset. The quick ratio of the company has been pretty low in both years and had decreased in 2004 showing that the company is carrying out a lot of...
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This note was uploaded on 04/14/2010 for the course ACCT Act695 taught by Professor Smith during the Spring '10 term at York University.
- Spring '10