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Unformatted text preview: -industry standards-historical standards-company ratio Commonly used ratios-liquidity ratios – ability to pay current debts-operating ratios (also known as activity ratios) – deal with the stability of the firm-indebtedness ratios (also known as leverage ratios)-Profitability ratios – measures the profit level of the business Liquidity Ratios-current ratio – C.A(current assets/ CL(current liability)-Quick ratio (also called acid test ratio) C.A –(inv + p.Exp)/CL-Working capital C.A – C.L Operating ratios -average collection period (also known as A/R turnover) A.R / ave. Daily sales-inventory turnover C.O.G.S / Ave inventory Indebtedness ratios (leveraging)-debt to total assests-total debt/total assests Example 2008 300000 Down payment equity 30000 - 54000 270000 270000/300000 =90% Profability ratio Return on investment (R.O.I) Net profit/owner’s equity...
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This note was uploaded on 12/10/2010 for the course ADM ADM 1300 taught by Professor Peterkoppel during the Fall '10 term at University of Ottawa.
- Fall '10