Please compute, analyze and discuss the following ratios for the Signature Assignment<\/p>\n
1. Liquidity Ratios: <\/p>\n
(a) Current ratio (formula) = current assets\/current liabilities expressed as in decimals. The focus of the current ratio analysis is to find out if a company has cash-flow, or not.<\/p>\n
2. Profitability Ratios: <\/p>\n
(a) Gross profit margin (formula) = sales \u2013 cost of goods sold\/sales expressed as percentages <\/p>\n
(b) Net profit margin (formula) = net profit after taxes\/sales expressed as percentages<\/p>\n
(3) Return on investment (formula) = net profit after taxes\/total assets expressed as percentages. <\/p>\n
For the gross profit margin, cost of goods sold is for companies that manufacture products, while the same for service companies is called cost of sale. <\/p>\n
Please note that a revenue amount in the income (P&L) statement is the same as sales. It is a good practice to have a large gross profit margin, so that you have funds left over to cover operating (SG &A) expenses, interest on loans, taxes, and still make a profit. <\/p>\n
4. Activity\/Asset Management Ratios: <\/p>\n
(a) Days of inventory (formula) = inventory\/cost of goods sold divided by 365 day<\/p>\n
(b) Average collection period (formula) = accounts receivable\/sales per year divided by 365 days. <\/p>\n
(c) Fixed asset turnover (formula) = sales divided by fixed assets. <\/p>\n
Collecting receivables faster in few days and selling the inventory as fast as possible in few days or a week after they were acquired is good for the cash-flow (liquidity) position of the firm. <\/p>\n
5. Leverage Ratios: <\/p>\n
(4) Debt to asset ratio (formula) = total debt\/total assets expressed as percentages. You do this ratio to find out if a company uses debt, or their money to finance new assets. <\/p>\n
6. Interest coverage ratio (formula) = earnings before interest and taxes (EBIT) divided by interest expenses.<\/p>\n","protected":false},"excerpt":{"rendered":"
Please compute, analyze and discuss the following ratios for the Signature Assignment 1. Liquidity Ratios: (a) Current ratio (formula) = current assets\/current liabilities expressed as in decimals. The focus of the current ratio analysis is to find out if a company has cash-flow, or not. 2. Profitability Ratios: (a) Gross profit margin (formula) = sales […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[10],"class_list":["post-78467","post","type-post","status-publish","format-standard","hentry","category-research-paper-writing","tag-writing"],"_links":{"self":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/78467","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/comments?post=78467"}],"version-history":[{"count":0,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/78467\/revisions"}],"wp:attachment":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/media?parent=78467"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/categories?post=78467"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/tags?post=78467"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}