Question

please help questions 4 5 6 9

ments allow a finance manager 4. What are liquidity ratios? Give an example of a liquidity ratio and how i helps evaluate a company's historical performance or future performance from an outsider's view. 5. What are solvency ratios? Which ratio would be of most interest to a banker considering a debt loan to a company? Why? 6. What are asset management ratios? For retail firms, what is one of the key management ratios? Why? 7. What does the P/E ratio tell an outsider about a company? Why might this ratio not provide very compelling evidence of the firm's performance? 8. What are the three components of the DuPont identity? What do they analyze? 9. What does analyzing companies against their industry tell a finance manager or financial analyst?

Answer 1

4.

Liquidity ratios help to analyze if the company is in a situation to meet its current liability obligations or not. The example of liquidity ratios are Current Ratio, Quick Ratio, Cash Ratio.

$Current Ratio = Current Assets/Current Liabilities$

It helps to evaluate the company's past and future performance by comparing the extent of liabilities against the assets of the firm. Thus a low ratio as compared to past performance might signal a risk for the company and vice versa.

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