Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 3 TCDN (Ratio analysis (SHORT-TERM SOLVENCY (Current ratio…
Chapter 3 TCDN
Ratio analysis
Financial ratios
-
Disadvantage: different people and different sources frequently don’t compute them in exactly the same way, and this leads to much confusion
SHORT-TERM SOLVENCY
-
-
Current ratio
-
a company's ability to pay back its liabilities with its assets (cash, marketable securities, inventory, accounts receivable).
Ex: Current ratio = 1.31 times => Prufrock has its current liabilities is covered 1.31 times by current assets
Quick Ratio
-
-
measures a company's ability, using its quick assets, to pay off its current debt
-
Long-term solvency
-
total debt ratio
-
the more leveraged a company is, implying greater financial risk.
-
-
Cash Coverage
-
-
The higher the coverage ratio, the easier it should be to make interest payments on its debt or pay dividends.
-
-
Market Value Measures
-
-
-
Enterprise Value
-
is a measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization
-
The DuPont Identity
-
-
If ROE is unsatisfactory by some measure, then the DuPont identity tells you where to start looking for the reasons
-
-