Question

Please List The Formula and Definition of Each Term

Return on assets =

Asset turnover =

Payout ratio =

Return on common stockholders’ equity=

Liquidity ratios measure

Working capital =

Current ratio =

Answer 1

Return on Assets Definition Return on Assets is a profitability ratio that measures the rate of return on assets owned or invested during the particular time period it is the ratio of net income to total average assets. Net income is taken from the company's income statement and average total assets are taken from the balance sheet. formula Return on Assets ratio = net income/ total average assets* 100 Asset Turnover Definition Asset turnover ratio is a profitability ratio that measures the company's ability to use of its total average assets in generating sales revenue . It explains the efficiency of company's assets to generate sales during the particular time period. Sales are derived from the income statement and average assets are derived from the balance sheet. formula Asset turnover = total sales / average assets

payout ratio Definition Dividend payout ratio is a the ratio of total dividends paid out to the shareholders and net income of the company.it indicates the percentage of profits paid out to shareholders as a cash dividends. formula Payout ratio = dividend per share / earning per share (or) total dividends paid/net income Return on common shareholder's equity Definition Return on common shareholder's equity is a profitability ratio that indicates the ability of the firm to generate net income from its common shareholders investment in the business. Net income means income after tax and preferred dividend. Common shareholders equity refers only the equity of ordinary shareholders. formula Return on common shareholders equity=( netincome - preference dividends )/average common shareholders equity*100

Liquidity ratios :liquidity ratios explains the company's ability to pay off its current or short term obligations .these are current ratio, quick ratio , cash ratio. working capital : working capital is helpful to meet the day to day operations of the business. It is the difference between the current assets and current liabilities. Current assets are cash, bank, accounts receivables ,and short term investment etc.current liabilities are creditors, accounts payables and outstanding expenses. formula working capital = total current assets - total current liabilities current ratio definition current ratio explains the relationship between the firms total current assets and current liabilities.the ideal current ratio is 2:1 it means current assets are two times than current liabilities. formula current ratio= current assets/current liabilities