Accounting
CURRENT RATIO The most common ratio using current-asset and data is the current ratio, which is current assets divided by current Recall the makeup of current assets and current liabilities. Inventory is to receivables through sales, the receivables are collected in cash, and the cash is used to buy inventory and pay current liabilities. A company's current assets and current liabilities represent the core of its day-to-day operations. The current ratio measures the company's ability to pay current assets with current liabilities. Generally a higher current ratio indicates a stronger financial position. A higher current ratio suggests that the business has sufficient liquid assets to maintain normal business ACID-TEST RATIO The acid-test (or quick) ratio tells us whether the entity could pay all its current liabilities if they came due immediately. ÷ That is, could the company pass this acid test? To do so, the company would have to convert its most liquid assets to cash.To compute the acid-test ratio, we add cash, short-term investments, and net current receivables (accounts and notes receivable, net of allowances) and
This calculation provides net income available to the common stockholders, which we need to compute the ratio. Accounts receivable turnover measures a company's ability to collect cash from credit customers. Dividend yield is the ratio of dividends per share of stock to the stock's market price per share. Earnings per share of common stock, or simply earnings per share (EPS), is perhaps the most widely quoted of all financial statistics. Shareholders have invested in the company's stock,and net income is their return. Preferred stockholders, who invest primarily to receive dividends, pay special attention to this ratio. A popular measure of profitability is rate of return on common stockholders' equity, which is oftenshortened to return on stockholders' equity, or simply return on equity. INVENTORY TURNOVER is a measure of the number of times a company sells its average level of inventory during a year. The debt ratio measures the effect of debt on the company's financial position (balance sheet) but says nothing about its ability to pay interest expense. EARNINGS PER SHARE OF COMMON STOCK. We then divide net income available to common stockholders by the average stockholders' equity during the year. Therefore, a business strives for the most profitable rate of inventory turnover, not necessarily the highest rate. Common stockholders' equity is total stockholders' equity minus preferred equity. For this reason, the ratio is also called the interest-coverage ratio.
Common topics in this essay:
INVENTORY TURNOVER,
ACID-TEST RATIO,
CURRENT RATIO,
STOCKHOLDERS' EQUITY,
DEBT RATIO-tells,
NET SALES,
STOCK Earnings,
TIMES-INTEREST-EARNED RATIO,
TOTAL ASSETS,
Accounts Receivable,
net income,
stockholders' equity,
accounts receivable,
current liabilities,
rate return,
common stock,
net sales,
current ratio,
debt ratio,
share common stock,
common stockholders',
common stockholders' equity,
income available common,
return net sales,
assets current liabilities,
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Acceptance Essays
