Ratio - of time. Long-term creditors and stockholders are...

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Ratio Analysis In previous chapters we presented many ratios used for evaluating the financial health and  performance of a company. Here we provide a summary listing of those ratios. (Page references to  prior discussions are provided if you feel you need to review any individual ratios.) The  appendix  to  this chapter provides an example of a comprehensive financial analysis employing these ratios. LIQUIDITY RATIOS Liquidity ratios  (Illustration  13-16 ) measure the short-term ability of the company to pay its  maturing obligations and to meet unexpected needs for cash. Short-term creditors such as bankers  and suppliers are particularly interested in assessing liquidity.  Illustration 13-16    Summary of liquidity ratios SOLVENCY RATIOS Solvency ratios  (Illustration  13-17 ) measure the ability of the company to survive over a long period 
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Unformatted text preview: of time. Long-term creditors and stockholders are interested in a company's long-run solvency, particularly its ability to pay interest as it comes due and to repay the balance of debt at its maturity. Illustration 13-17 Summary of solvency ratios PROFITABILITY RATIOS Profitability ratios (Illustration 13-18 ) measure the income or operating success of a company for a given period of time. A company's income, or lack of it, affects its ability to obtain debt and equity financing, its liquidity position, and its ability to grow. As a consequence, creditors and investors alike are interested in evaluating profitability. Profitability is frequently used as the ultimate test of management's operating effectiveness. Illustration 13-18 Summary of profitability ratios...
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Ratio - of time. Long-term creditors and stockholders are...

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