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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Kraft Foods Inc. - 2009 Case Notes Prepared by: Dr. Mernoush Banton Case Author: Kristopher J. Blanchard A. Case Abstract Kraft Foods Inc. (www.Kraftfoodscompany.com) is a comprehensive strategic management case that includes the company’s calendar December 31‚ 2008 financial statements‚ competitor information and more. The case time setting is the year 2009. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year
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Valuation Ratios Comparing all the companies we have here‚ we know the sector value is 6.15‚ and we can see that Costco is has the largest number with 28.59‚ meaning that this company has big growth‚ and it is not risky. Along the other companies‚ we know that Target‚ Walmart‚ and Home Depot are doing well too. In this same case Nordstrom and Macy’s are not doing so well‚ they are a little below average‚ so we can conclude they are not growing that fast‚ and they are tending to become a little
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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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When thinking about corporate culture and ethics the company that came to mind for me was Tim McCauley Trucking LLC (TMCT) a company I worked for as a dispatcher for several years. TMCT was a company that believed in values‚ integrity‚ and consistency in how they treated employees‚ vendors‚ and customers. One of the main things that Mr. McCauley would always say is "that in order to succeed you must know where you are trying to go‚ what you are trying to do along the way‚ how you want to be remembered
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My first part is showing how our strategic investments boost our activity First‚ our gross profit on net sales ratio for 2010 is equal to about 20% like its main competitor‚ Staples‚ except that Amazon sales are three times superior to Staples sales. In fact‚ for 5 years‚ our average growth in sales has been 34% against 25% for the industry. This higher progression is due to investments in all aspects of the customer experience‚ including: lowering prices‚ improving availability‚ offering faster
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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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