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HSM 260 Financial Ratios-General Motors

HSM 260 Financial Ratios-General Motors - Current Ratio =...

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Current Ratio = Current Assets / Current Liabilities Current Ratio = $55,515 / $74,892 Current Ratio = 0.74 Debt Ratio = Total Liabilities / Total Assets Debt Ratio = $453,906 / $482,029 Debt Ratio = 0.94 Return on Equity = Income from Continuing Operations / Average Shareholder’s Equity Return on Equity = $2,805 / [($27,726 + $25,268) / 2] Return on Equity = $2,805 / $26,497 Return on Equity = 10.59% Return on Investment = Income from Continuing Operations / Average Total Assets Return on Investment = $2,805 / [($482,029 + $449,999) / 2] Return on Investment = $2,805 / $466,014 Return on Investment = 0.60% The current ratio is one of the measures of the firm’s liquidity, which is the short term capability of firm to settle maturing obligations and to meet expected needs for cash. General Motors’ current ratio indicates that for every $1.00 current liabilities, General Motors has only $0.74 of current assets to pay for it. This is low and suggests that GM has liquidity problem. Debt Ratio, Return on Equity and Return on Investments are three of the measures of the
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