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1.
Debt Ratio
: Total Liabilities/ Total Assets.
This tells us how much of a
company’s assets are funded by debt rather than equity.
2.
Current Ratio
: Current Assets/ Current Liabilities.
This is an important one and
tells us how able a company is to meet its short term obligations or how
liquid
the
company is.
3.
Quick Ratio (acid test
): (cash + current investments + A/R)/current liabilities.
Also a liquidity ratio that tells us how able to meet short term obligations is.
4.
Return on Sales:
Net Income/ Sales.
This tells us how much of each dollar in
revenue/ sales that we have goes to net income.
For instance, if you have a
Return on Sales of 20%, it means that for every dollar in sales, $.20 is left after
expenses are paid.
5.
Asset Turnover Ratio:
Sales/ Total Assets.
This tells us how well a company is
utilizing the assets it has to generate revenue.
6.
Return on Equity:
Net Income/ Total Stockholder’s Equity.
This tells investors
how much, for each dollar they invest, income is earned.
7.
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This note was uploaded on 07/02/2011 for the course ACCT 225 taught by Professor Canace during the Spring '08 term at South Carolina.
 Spring '08
 CANACE

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