Question

please type it in computer dont write it by hand

For each of the following ratio, please (1) define, (2) show the formula, and (3) discuss when and how to use it. 1. Current Ratio 2. Quick or Acid-Test Ratio 3. Current Cash Debt Coverage 4. Accounts Receivable Turnover 5. Inventory Turnover 6. Asset Turnover 7. Profit Margin on Sales 8. Return on Assets 9. Return on Common Stockholders' Equity 10. Earnings per Share 11. Price-Earnings Ratio 12. Payout Ratio 13. Debt to Assets Ratio 14. Times Interest Earned 15. Cash Debt Coverage 16. Book Value per Share 17. Free Cash Flow

Answer 1

1) Current ratio is a comparison of current assets to current liabilities, calculated by dividing your current assets by your current liabilities. Potential creditors use the current ratio to measure a company's liquidity or ability to pay off short-term debts.

2) The acid-test, or quick ratio, compares a company's most short-term assets to its most short-term liabilities to see if a company has enough cash to pay its immediate liabilities, such as short-term debt. The acid-test ratio disregards current assets that are difficult to liquidate quickly such as inventory. The calculation is done by dividing the summation of the most liquid assets like cash, cash equivalents, marketable securities or short-term investments, and current accounts receivables by the total current liabilities.

3) Current cash debt coverage ratio is calculated by extracting the net cash flow from operating activities from the Statement of Cash flow and then, dividing it by average liabilities of the company. Current cash debt coverage ratio is a liquidity ratio that measures the relationship between net cash provided by operating activities and the average current liabilities of the company. It indicates the ability of the business to pay its current liabilities from its operations.

4) The accounts receivable turnover ratio measures a company's effectiveness in collecting its receivables or money owed by clients.

Accounts Receivable Turnover=Average Accounts Receivable/Net Credit Sales​

5) Calculating the average inventory, which is done by dividing the sum of beginning inventory and ending inventory by two. Dividing sales by average inventory. the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year.

6) To calculate the asset turnover ratio, divide net sales or revenue by the average total assets.It is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.

7) Net profit margin is calculated by dividing the net profits by net sales, or by dividing the net income by revenue realized over a given time period. Profit margin gauges the degree to which a company or a business activity makes money, essentially by dividing income by revenues

8) The return on assets shows the percentage of how profitable a company's assets are in generating revenue. calculated by dividing net income by average total assets. This ratio can also be represented as a product of the profit margin and the total asset turnover.

9) Return on common stockholders' equity ratio measures the success of a company in generating income for the benefit of common stockholders. It is computed by dividing the net income available for common stockholders by common stockholders' equity. The ratio is usually expressed in percentage.

10) Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability.

11) P/E Ratio is calculated by dividing the market price of a share by the earnings per share.  The ratio is used for valuing companies and to find out whether they are overvalued or undervalued

12) The dividend payout ratio can be calculated as the yearly dividend per share divided by the earnings per share, or equivalently, the dividends divided by net income.

13) Debt to asset ratio formula to calculate the percentage: (Total liabilities) / (total assets).

14) The formula for a company's TIE number is earnings before interest and taxes (EBIT) divided by the total interest payable on bonds and other debt. The result is a number that shows how many times a company could cover its interest charges with its pretax earnings.

15) Comparing cash from operating activities to total liabilities, the cash debt coverage ratio measures a company's ability to pay off all of its liabilities with cash from operations.

16) Book value per share (BVPS) takes the ratio of a firm's common equity divided by its number of shares outstanding. Book value of equity per share effectively indicates a firm's net asset value (total assets - total liabilities) on a per-share basis.

17) Free cash flow calculation common measure is to take the earnings before interest and taxes multiplied by (1 − tax rate), add depreciation and amortization, and then subtract changes in working capital and capital expenditure.