The Current Ratio is calculated by taking the current debt and dividing it by the current liabilities. It is the measurement on how a company can meet its short term liabilities with liquid assets (Loth, Rihar, 2015a).A higher ratio indicates favorable activity. A company should be able to meet it responsibilities with its
Equity ratio and debt ratio are both very important because it shows how much of the assets used for production is really owned by the owner of a company. According to calculations in the appendix, RBC has the highest equity ratio and the lowest debt ratio. This is considered favourable compared to Sun life and BMO’s equity and debt ratio. When it comes to return on total assets BMO has the highest return. Meaning it is earning more per assets than RBC and Sun
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
Current ratio: The Current ratio helps us to understand the ability of the company to pay its short- term liabilities against its short- term assets. If the current ratio is high then it means company can pay its debts easily and is in a good position to overcome any hurdles during the market fluctuation and vice-versa. The current ratio is calculated as follows:
This purpose of this paper was to evaluate the financial statements of IBM Corporation during the past five years to assess the future profitability of the company. Unfortunately, this report only reflects up to four years, as appose to a five year analysis. I used Plaza College Library along with Queens Library to do my research. This helps me with the data base I needed to access and wasn’t able to at home. My professor helped me with my research; he helped me understand the things I didn’t understand. He also guided me to web pages that help me with my research. I used many search engines such as IBM company web page, Google, ProQuest, MSN Money, and Yahoo Finance. IBM web page was the best because most of my information came for the company web pages. Google was helpful because it help me find my company information that wasn’t on the web page. ProQuest is good for data base but it wasn’t helpful to my research. MSN money was very helpful I was able to get my 10k report and many other things. Yahoo Finance, I was able to get all my finance information without a problem. All the information I received, I was able to put in it in my research paper to create a 10 to 12 page research paper. In this paper I have applied knowledge of business concepts, information literacy techniques, and critical thinking.
Financial statements can provide a wealth of information about a given organization. These statements provide information about the company’s financial position, cash flows, operations, performance and changes in the financial position. This information may be used as part of the decision making process for employees, shareholders, investors and competitors. Based upon these financial statements, key ratios are used to provide additional insight as to the financial health of a given company. Being familiar with financial statements can increase financial literacy. For this discussion, Citigroup’s (Citi) financial statements will be reviewed.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
The ratio of 1.7 for the last two years indicates consistency, although a lower number is preferred. As a company produces high value product, this could be a satisfactory ratio. By comparing it to 2011 when a ratio was 2.9, in the last two years a ratio improved
Evaluating a company’s financial condition can be done by looking at its profitability or its ability to satisfy long-term commitments. These measures can be viewed through an analysis of a company’s financial statements, including the balance sheet and income statement. This paper will look at the status of Scholastic Company’s (Scholastic) ability to satisfy its long-term commitments and at the profitability of Daktronics, Inc. (Daktronics). This paper will include various financial ratio calculations and an analysis of the notable trends. It will also discuss the profitability and long-term borrowing positions of the firms discussed.
Barra Airways has an interest coverage ratio (ICR) of 18; this means that Barra Airways is not burdened with a large amount of interest payments on existing debts. Therefore, using debt does appear to be an attractive source of finance. This is because Barra Airways existing interest burden is low, meaning that to increase it would have a reduced effect on the company’s net profit. However, EasyJet has an ICR of 30.88, considerably larger than that of Barra Airways . Lenders may look at this data and conclude that Barra Airways is a riskier company to lend too than others in the same industry; this will result in a higher interest rate on any debt taken out.
The debt ratios increased by 2.7% to 57% more than double the industry standard of 24.5%. The long term debt increased from $700,000 to $ 1,165,250 an increment of 66.5% in the year 2002. The company is currently highly leveraged thus it needs to work on reducing long term debts and continue to increase assets. The times interest earned ratio dropped by 0.3 to 1.6 in the year 2003. The company could face difficulties making interest payments in case of a sales slump.