Notes 2-6-08 - BUS 170 2/6/2008 CH17 Leverage Ratios Long...

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BUS 170 2/6/2008 CH17 Leverage Ratios Long term debt ratio = Long-term debt / long term debt +equity Long-term debt + equity = capital structure Debt-equity ratio = Long-term debt / equity Total debt ratio = total liabilities / total assets - The proportion of debt financed by debt Liquidity Ratios - how easily the company can get its hands on cash. Net working capital to total assets ratios = NWC / total assets NWC = CA-CL This measures the company’s ability to meet obligations and the pool of assets available. Current ratio = CA / CL The pool of CA available to meet the CL Proportion of CA to CL Should be x>1 Efficiency Ratios – Measures how productively (effectively) the firm is using its assets. Using – liquidity, profitability, performance Efficiency ratios = activity-based items / average (balance sheet item) Asset turnover ratio = sales / average total assets ((TA year 1 +TA year 2)/2) Measures sales activity from total assets Show how hard the firm’s assets are being used
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This note was uploaded on 09/08/2010 for the course BUS 170 at San Jose State University .

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Notes 2-6-08 - BUS 170 2/6/2008 CH17 Leverage Ratios Long...

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