Equipment & Furniture Less Accumulated Depreciation Total Net Fixed Assets TOTAL ASSETS TOTAL LIABILITIES &EQUITY ADDITIONAL INFORMATION Income Before Interest & Tax Income After Interest & Tax Required Using the information provided, calculate the following ratios for year 20X4: How much current assets was there to cover for every dollar of current liabilities? a. Ans: b. For every dollar invested by stockholders (owners), how much did the creditors invest? Ans: On average, how long did it take for the company to collect its accounts receivable during the year? c. Ans: d. What is the company's ability to pay back its current liabilities with its quick assets? Ans: How many times did the company generate the operating income in order to cover interest expenses? e. Ans: f How many times was the working capital used by the company to generate revenue over the year? Ans: g How much assets did the company have in order to cover for every dollar of liabilities? Ans: NHM 310: RATIO ANALYSIS-FORMULA &DEFINITION CURRENT RATIO CURRENTASSETS/CURRENT LIABILITIES For every Sl in current labilas, there is Sx of current assets to cover QUICKRAT IO (ACIDTEST RATIO) ICASH+AR+NR+ MKT SECURITIEST/CURRENT LIABILITIES For every $1 ofcurrent liabilites, there is SX of LIQU ID or QUICKassets to cover WORKING CAPITAL CURRENT ASSETS-CURRENT LIAB ILITIES Company's efficiency and abili ty to payoffits short-term labil ities WORKING CAPITAL TURNOVER-REVENUE AVG WORKING CAPITAL Theworking capital of $X was used XX tmes to generate revenue during the year ACCOUNTS RECEIVABLE TURNOVER = TrAL REVENUE / AVG ACCOUNTS RECEIVABLE Therapidity of convertingaccount receivables to cash AVERAGE COLLECTION PERIOD 365/ARI Thenumber of days that ittakes for a bus iness to co llect all its account receivables INVENTORYTURNOVER COST OF GOODSSOLD AVG INVENTORY How manytimes a company's inventory is sold and replaced over an acoounting period SOLVENCY RATIO (TA:TL)-TOTAL ASSETS / TOTAL LIABILIrIES For every $1 in iabil ities, there is $X in assets to cover DEBT TO EQUDErYCTL:TE) = TOTAL LIABILTES / TOTAL EQUITY For each $1 imvested by the stockholders, the creditors have invested SX NUMBER OF TIMES INTEREST EARNED RATIO EBIT INTEREST EXPENSES Theoperating income of SX was generated to cover interest expenses XXtimes PROFIT MARGI: NET INCOME /TTAL REVENUE Overall measurement of managements ability to generatesales OPERArING EF FIaENCY RxrIO GROSS 0PERATING PROFIr / TOTAL REVENUE RETURN ON ASSETS NET INCOME/AVGASSETS How efficient managementis at us ing its assets to generate earnings GR0SS RETURN ON ASSETS EBIT / AVG ASSETS invested in assets, the owner recened 3% as return. For every Sl RETURN ON INVEST MENT OR RETURN ON EQUITY NET INCOME/AVG EQUITY Theamount of netincome returned as a percentageof shareholders equity. EARNINGS PER SHARE NET INCOME AVG OUTSTANDING SHARES Theporton of acompany's prof it al located to each foommon stock PERATIO MARKET PRICE PER SHARE/EPS A valuation ratio of a company's current share price compared toits per-share earnings OCCUPA NCY 96 ROOMS OCCUPIED / ROOMS AVAILABL E MULTIPLE OCCUPANCY 96 ROOMS WITH 2 OR MORE GUESTS / ROOMS SOLD REVPAR REVENUE/ROOMS AVA ILAB LE ar ADR"OCC% - ROOMREVE ENUE/NU MB ER OF ROOMS SO
