Respond to at least 1 of your fellow classmates with at least a 100-word reply about their Primary Task Response regarding items you found to be compelling and enlightening. To help you with your discussion, please consider the following questions:

• What did you learn from your classmate's posting?
• What additional questions do you have after reading the posting?
• What clarification do you need regarding the posting?
• What differences or similarities do you see between your posting and other classmates' postings

Responding to the statement below,

Discussion Board 2

As a prospective investor in Jim's Autobody it is important to look at the different ratios that are used to evaluate how well the company is performing. There are several key ratios that should be looked at before investing in any company. The most common type of financial ratio is the Earnings per share ratio. This ratio will tell "you much a company earns in profit for each outstanding share of stock (Bankrate)". This ratio is important for investors to know, however, one must understand the limits of this ratio. Executives have control over the accounting practices that may have an impact on net income and earnings per share. (Bankrate) To determine the Earnings Per Share divide the net profit by the number of shares in the company and multiply by one hundred. For Jim's Autobody the earnings per share are determined by taking the net income at $21,000 and dividing it by its common stock at $171,000, multiplied by 100 to get the percentage of 1228.07%.

To determine the liquidity of Jim's Autobody, using the quick ratio will help investors to understand the company's ability to pay its bills with its liquid assets. (Investopedia) The quick ratio "indicates the company's ability to instantly use its near-cash assets to pay down its current liabilities (Investopedia)". To determine the quick ratio divide the company's liquid assets (cash and cash equivalents, market securities, and accounts receivable) by its total liabilities. Jim's Autobody has liquid assets that include cash, and accounts receivable and total $121,800 divided by its total liabilities of $11,000 which equals a ratio of 1107.27%

This is just an example of two ratios that are available for the investor to use. Certain types of financial ratios are used by investors to determine how healthy a company is. The difference between investing in a profitable company and one that is not as profitable, could come down to being able to understand the difference between the various ratios used to evaluate the company. It is crucial that investors know how to translate the numbers generated by ratios. Being able to compare investments helps the investor to develop trading strategies and by using and understanding ratios to compare investments makes it a lot easier to weed out under-performing stocks.