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RMA Sample Common-Size BS

RMA Sample Common-Size BS - Ratios • Measures how...

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RMA Sample Common-Size BS 1
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RMA Sample Common-Size IS 2
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RMA Sample Ratios 3
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More on Ratios Appendix 4
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Liquidity Ratios Measures the firm’s ability to pay bills in the short-term. Important to short-term creditors (e.g. banks, suppliers). Current Ratio = Current Assets ÷ Current Liabilities Quick Ratio = Current Assets - Inventory ÷ Current Liabilities 5
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Leverage Ratios Measures the firm’s ability to pay long-term obligations. Important to long-term creditors (e.g. banks, bondholders). Total Debt Ratio = Total Debt ÷ Total Assets Debt-Equity Ratio = Total Debt ÷ Total Equity 6
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Turnover Ratios Measures how efficiently the firm is using assets to generate revenues. Inventory Turnover = Cost of Goods Sold ÷ Inventory Days Inventory = 365 Days ÷ Inventory Turnover 7
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Profitability
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Unformatted text preview: Ratios • Measures how profitable are the activities of the firm. Profit Margin = Net Income ÷ Sales Return on Assets (ROA) = Net Income ÷ Total Assets 8 Market Value Ratios • Measures market value indices for publicly traded companies. • Important to the investment community and credit markets Earnings Per Share (EPS) = Net Income ÷ Shares Outstanding 9 ROE and Du Pont Analysis • The difference between ROA and ROE is the use of financial leverage. • ROE can be ‘decomposed’ into it’s component parts to identify sources of strengths and weaknesses, as follows: 10 Tax Burden Interest Burden Profit Margin Asset Turnover Leverage...
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RMA Sample Common-Size BS - Ratios • Measures how...

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