Notes 2-4-08 - High in long-term debt ratio means that the...

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BUS 170 2/4/2008 CH3 Google Yahoo EBIT 100 100 Interest 40 0 Pre-tax income (EBT) 60 100 Taxes (35%) 21 35 Net Income 39 65 Interest is + cash provided by financing 40 0 79 65 Assume that Net Income = Cash Flow CH17 Financial Statements Analysis Leverage Ratios – how heavily the company is in debt. - Use of fixed cost financing (debt, pref. Stocks) - Risk and reward opportunity 1. Long Term Debt Ratio Long term debt / Long term debt + equity (Capital Structure) Proportion of C.S. that is made up of LT-debt (lease obligations, etc.)
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Unformatted text preview: High in long-term debt ratio means that the risk is high because the company is using high laverages. Liquidity Ratios - how easily the company can get its hands on cash. Efficiency Ratios Measures how productively the firm is using its assets. Profitability Ratios Measures the firms return on investment ROA, ROE...
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