Question

a. Current Ratio
b. Quick Ratio
c. Days Accounts Receivable
d. Day Inventory
e. Days Accounts Payable
f. Liabilities to Asset Ratio
g. Liabilities to Shareholders’ Equity Ratio
h. Long Term Debt Ratio to Long-Term Capital Ratio
i. Operating Cash Flow to Total Liabilities Ratio
j. Interest Coverage Ratio

Apply those ratios to analyze Google financial position and provide clear interpretation on each ratio.  

Answer 1

a. Current Ratio:-

The current ratio is a type of liquidity ratio which is established by dividing total current assets of a company with its total current liabilities. It shows the amount of current assets available with a company for every unit of current liability payable

current ratios = current assets / current liabilities

Current Assets: It includes Cash & its equivalents, B/R, Inventory, Marketable Securities, Debtors, Loans and Advances, etc

Current Liabilities: It includes Creditors, B/P, Provisions, Short-Term Loans etc.

b. Quick Ratio:-

The quick ratio is calculated by adding all the quick assets together and dividing by the total current liabilities. Here is the quick ratio equation.

The quick ratio is designed to show investors and creditors how quickly a company can pay off its short-term debt. Assets like cash, marketable securities, and accounts receivable can quickly be converted into cash and used to pay off current liabilities.

Quick Ratio = cash + market securities + debtors / currents liabilities

c. Days Accounts Receivable:-

Accounts receivable days is the number of days that a customer invoice is outstanding before it is collected. The point of the measurement is to determine the effectiveness of a company's credit and collection efforts in allowing credit to reputable customers, as well as its ability to collect cash from them in a timely manner. The measurement is usually applied to the entire set of invoices that a company has outstanding at any point in time, rather than to a single invoice.

(Accounts receivable ÷ Annual revenue) x Number of days in the year

d. Day Inventory:-

inventory days = 365 / inventory turnover

The formula to calculate days in inventory is the number of days in the period divided by the inventory turnover ratio. This formula is used to determine how quickly a company is converting their inventory into sales. A slower turnaround on sales may be a warning sign that there are problems internally, such as brand image or the product, or externally, such as an industry downturn or the overall economy.

f. Liabilities to Asset Ratio:-

It is also called debt to total resources ratio or only debt ratio. The debt to asset ratio measures the percentage of total assets financed by creditors. It is computed by dividing the total debt of a company with its total assets. This ratio provides a quick look at the part of a company’s assets which is being financed with debt.

Liabilities to Asset Ratio = total liabilities / total assets

j.  Interest Coverage Ratio:-

Interest Coverage Ratio is a measure of a company's ability to meet its interest payments. Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time period, often one year, divided by interest expenses for the same time period. The interest coverage ratio is a measure of the number of times a company could make the interest payments on its debt with its EBIT. It determines how easily a company can pay interest expenses on outstanding debt.

Interest coverage ratio = E B I T / Interest expenses