LIMITATIONS OF RATIO ANALYSIS The debt-equity ratio gives an indication of an enterprise’s ability to sustain losses without jeopardizing the interests of creditors. This ratio is based only on information provided in the balance sheet. Although stockholders’ equity serves as a buffer to protect the creditors’ interests‚ it should be kept in mind that the earning prospects of the enterprise are also relevant in judging a firm’s ability to survive the long run. Although the use of ratios can prove helpful
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Checklist of Financial Ratios Financial ratios allow a business owner to analyze and assess the firm’s financial performance and position over a period of time. By computing the financial ratios‚ you can also detect certain relationships between the different types of information. It gives you a quick indication of the firm’s performance in the areas of liquidity‚ profitability‚ capital structure as well as the financial position and potential risk involved. | | 1) | | Asset Turnover
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additional data for the Fama-French three-factor model. 1. What factors should Ameritrade management consider when evaluating the proposed strategy? 2. Calculate Ameritrade’s debt-to-value ratio using both the book value and market value of the firm’s equity. How does Ameritrade’s debt-to-value ratio compare to that of other discount brokerage and investment service companies in Exhibit 4? In general terms‚ how does leverage affect the riskiness of a firm’s equity? 3. Ameritrade has a short
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Key Points Chapter 1: Key to success – recurring cash flows Chapter 2: Key to success for Entrepreneurs – persistence! Chapter 3: Key to success for BP- it Explains 1) Management‚ 2) Management‚ 3) CF Executive Summary – the most important section Include ROI and NPV (IRR?) Ratio analyses Chapter 4: Key point – must use the same accounting method Key point: Successful entrepreneurs know their cash position at all times. Chapter 5: Liquidity – the most important ratios Key point – Entrepreneurs
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In this section of the report‚ we will be discussing three financial ratios to determine Netflix’s liquidity‚ debt management‚ and profitability. These three areas are important because if there is a sudden shift in consumers needs‚ these areas would be affected the most. Liquidity (Current Ratio): The current ratio is calculated using the current assets by current liabilities. This ratio shows how fast Netflix is able to pay off their short-term liabilities using their current assets. Netflix’s
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in later years of the capital lease. Asset Turnover Ratios Higher because the operating lease records no balance sheet assets. Lower because a balance sheet asset is recorded‚ but the ratio will rise over time as the asset is depreciated. Debt-to-Equity Ratio Lower because there is no liability recorded on the balance sheet for an operating lease. Higher because a lease obligation liability is recorded on the balance sheet‚ but the ratio will decline over time as the lease is repaid. ROA &
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Introduction of Ratio MEANING OF RATIO: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship of two figures‚ which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute
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reports. The six ratios considered are current ratio‚ quick ratio‚ profit margin‚ operating ratio‚ debt-equity ratio‚ and debt-asset ratio. These ratios were compared over time‚ against its close competitors‚ which are Amazon.com Inc. and Wal-Mart Stores Inc.‚ and against a calculated industry benchmark. Based on our findings‚ we conclude that Indigo is financially healthy. For example‚ current and quick ratios are both higher than its competitors and its industry benchmark. Operating ratio indicated that
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for the research and article of Lang‚ Thomas’s “Nurse-Patient Ratios: A Systematic Review on the Effects of Nurse Staffing on Patient‚ Nurse Employee‚ and Hospital Outcomes” stems from the problem that the nursing workloads and patient “acuity” (the measurement of the intensity of nursing care required by a patient) is too high to provide a concise level of patient care (Lang 326). Continued reasoning for decreased nurse to patient ratios is that within the past 25 years an effort by hospitals to cut
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Price/Earnings Ratio Model (P/E) The P/E looks at the relationship between the stock price and the company’s earnings. The P/E is the most popular metric of stock analysis. A valuation ratio of a company’s current share price compared to its per-share earnings. For example‚ if a company is currently trading at $60 a share and earnings over the last 12 months were $2 per share‚ the P/E ratio for the stock would be 30 ($60/$2). The earnings multiplier can be computed as follows: P/E Ratio = Current Market
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