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Balance Sheet Ratios

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  Balance Sheet Ratios Ratio How to Calculate What it Means In Dollars and Cents Current Current Assets Measures solvency: The number of dollars in Current Current Liabilities  Assets for every $1 in Current Lialilites.For example: a Current atio of 1.! means that for every $1 of Current Liabilities# the company has $1.! inCurrent Assets ith hich to pay them.%uic& Cash ' Accounts eceivable Measures li(uidity: The number of dollars in Cash and Current Liabilities  Accounts eceivable for each $1 in Current Liabilities.For example: a %uic& atio of 1.1) means that for every $1 of Current Liabilities# the company has $1.1)in Cash and Accounts eceivable ith hich to paythem.*ebt+to+,orth Total Liabilities Measures financial ris&: The number of dollars of *ebt -et ,orth oed for every $1 in -et ,orth.For example: a *ebt+to+,orth ratio of 1./ means thatfor every $1 of -et ,orth that the oners have invested#the company oes $1./ of *ebt to its creditors. Income Statement Ratios 0ross Marin 0ross 2rofit Measures profitability at the 0ross 2rofit level: The number  3ales of dollars of 0ross Marin produced for every $1 of 3ales.For example: a 0ross Marin atio of 4).)5 means thatfor every $1 of 3ales# the company produces 4).) centsof 0ross 2rofit.-et Marin -et 2rofit 6efore Tax Measures profitability at the -et 2rofit level: The number of  3ales dollars of -et 2rofit produced for every $1 of 3ales.For example: a -et Marin atio of 7.85 means that for every $1 of 3ales# the company produces 7.8 cents of -et 2rofit. Overall Efficiency Ratios 3ales+To+Assets 3ales Measures the efficiency of Total Assets in eneratin Total Assets sales: The number of dollars in 3ales produced for every$1 invested in Total Assets.For example: a 3ales+To+Asset atio of 7.4/ means thatfor every $1 invested in Total Assets# the companyenerates $7.4/ in 3ales.eturn 9n -et 2rofit 6efore Tax Measures the efficiency of Total Assets in eneratin -et Assets Total Assets 2rofit: The number of dollars in -et 2rofit produced for every $1 invested in Total Assets.For example: a eturn on Assets atio of !.15 meansthat for every $1 invested in Assets# the company iseneratin !.1 cents in -et 2rofit 6efore Tax.  eturn 9n -et 2rofit 6efore Tax Measures the efficiency of -et ,orth in eneratin -et  nvestment -et ,orth 2rofit: The number of dollars in -et 2rofit produced for every $1 invested in -et ,orth.For example: a eturn on nvestment atio of 1 .15means that for every $1 invested in -et ,orth# thecompany is eneratin 1 .1 cents in -et 2rofit 6eforeTax. Specific Efficiency Ratios nventory Cost of 0oods 3old Measures the rate at hich nventory is bein used on anTurnover  :nventory annual basis.For example: an nventory Turnover atio of 8.;1 meansthat the averae dollar volume of nventory is used upalmost ten times durin the fiscal year.nventory4  Converts the :nventory Turnover ratio into an avera1e <days Turn+*ays :nventory Turnover  inventory on hand< fiure.For example: a nventory Turn+*ays atio of 4! meansthat the company &eeps an averae of thirty+seven daysof nventory on hand throuhout the year. Accounts 3ales Measures the rate at hich Accounts eceivable are beineceivable  Accounts eceivable collected on an annual basis.TurnoverFor example: an Accounts eceivable Turnover atio of ;. means that the averae dollar volume of Accountsecievalbe are collected eiht times durin the year. Averae4 Converts the Accounts eceivable Turnover ratio into theCollection  A=Turnover  averae number of days the company must ait for its2eriodAccounts eceivable to be paid.For example: an Accounts eceivable Turnover ratio of )/ means that it ta&es the company )/ days on averaeto collect its receivables. Accounts Cost of 0oods 3old Measures the rate at hich Accounts 2ayable are bein2ayable  Accounts 2ayable paid on an annual basis.TurnoverFor example: an Accounts 2ayable Turnover ratio of 17.) means that the averae dollar volume of Accounts2ayable are paid about telve times durin the year. Averae4 Converts the Accounts 2ayable Turnover ratio into the2aymentAccounts 2ayable Turnoveraverae number of days that a company ta&es to pay its2eriodAccounts 2ayable.For example: an Accounts 2ayable Turnover ratio of 4means that it ta&es the company 4 days on averae topay its bills.

5.Helic

Jul 23, 2017
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