Question

in your own words, what does each measure that current ratio, debt to equity ratio and...

in your own words, what does each measure that current ratio, debt to equity ratio and Return on equity ratio would tell us about your company that is important to investors and creditors?

Homework Answers

Answer #1
  1. Current ratio is caluculated as current assets/ current liabilities.
  2. Debt Equity Ratio = Total outside Debt/ Equity funds
  3. Return on Equity = Total return ( Revenue) / Equity funds

Interpretation for one comany:

  1. current ratio is tells about the company company liquidity position. current ratio falls below 1 it not good for the company. because the ratio says current laibilities more than current assets i.e. company may not pay their short term debts.
  2. debt equity ratio is 2 it is perfect mix of debt and equity of the comany. it varies from industry to industry. falls below the 2 it having more equity funds than debt funds it falls above 2 is debt is more than equity fundsi(i.e mix of debt equiy).falls above 2 it having more interest expenses revenue will be low.more equity funds means risk taken by shareholders is increses.
  3. return on equity shows the how much shareholders can earn from their investment noramlly it is greaterthan risk free investment.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
long-term debt ratio = long-term debt/longterm debt + total equity Why this ratio might be of...
long-term debt ratio = long-term debt/longterm debt + total equity Why this ratio might be of interest to investors or creditors, what this ratio tells us and whether the company is performing better or worse to the prior fiscal year. --> F18 = 42% , F19 = 40%
in your own words, what is a P-Value and what does it tell us?
in your own words, what is a P-Value and what does it tell us?
Compute Delta airline's debt to equity ratio at year end. How does it compare to the...
Compute Delta airline's debt to equity ratio at year end. How does it compare to the industry? What does this tell you about the company? (reference required to support the answer)
what does a ratio of 7.779 (sales/Net working capital) (2434703 / (838485 - 525460) tell you...
what does a ratio of 7.779 (sales/Net working capital) (2434703 / (838485 - 525460) tell you about a company Why this ratio might be of interest to investors or creditors: please explain how a ratio 7.779 is can be useful/notuseful for investors and creditors
What does margin measure? Describe this in your own words. Writing a formula is not a...
What does margin measure? Describe this in your own words. Writing a formula is not a sufficient answer. Discuss one specific way a business could increase its margin. question 2) What does turnover measure? As a manager, what is one way you could improve turnover for your division?
In 200 WORDS  American Apparel: Drowning in Debt? create a chart. Please type Calculate the current ratio,...
In 200 WORDS  American Apparel: Drowning in Debt? create a chart. Please type Calculate the current ratio, debt ratio, profit margin, and inventory turnover of the company. • Explain what each calculated ratio tells you about how well (or poorly) the company is performing.
The debt/equity ratio is 1.2. The value of your company (debt + equity) is $6,000,000. Your...
The debt/equity ratio is 1.2. The value of your company (debt + equity) is $6,000,000. Your company wants to use CAPM to calculate the cost of equity. Beta is 1.23. The market risk premium is 7% and the market return is 10%. Your debt is trading at par value and has a coupon rate of 4%. Relevant tax rate is 21%. What is your company’s WACC? Multiple Choice 5.31% 9.47% 10.42% 7% 8.12%
Out of current ratio quick ratio debt-to-equity ratio rate-earned-on-stockholders'-equity ratio rate-earned-on-total-assets ratio 1. Which ratio is...
Out of current ratio quick ratio debt-to-equity ratio rate-earned-on-stockholders'-equity ratio rate-earned-on-total-assets ratio 1. Which ratio is most important to look at when potentially investing in a company as a stockholder and why? 2. If you are a new supplier, which ratio would you be most interested in to decide to sell your merchandise? Why? Assume your terms for payment are 2/10; net/30. 3. Assume you are a banker and a corporation has met with you to borrow $100,000 and pay...
Out of current ratio, quick ratio, debt-to-equity ratio, rate-earned-on-stockholders'-equity ratio, rate-earned-on-total-assets ratio: 1. Which ratio is...
Out of current ratio, quick ratio, debt-to-equity ratio, rate-earned-on-stockholders'-equity ratio, rate-earned-on-total-assets ratio: 1. Which ratio is most important to look at when potentially investing in a company as a stockholder and why? 2. If you are a new supplier, which ratio would you be most interested in to decide to sell your merchandise? Why? Assume your terms for payment are 2/10; net/30. 3. Assume you are a banker and a corporation has met with you to borrow $100,000 and pay...
1) Company's Current ratio 2017 Current ratio = 2.055 2016 Current ratio = 2.077 Explain what...
1) Company's Current ratio 2017 Current ratio = 2.055 2016 Current ratio = 2.077 Explain what information this ratio provides (define), and what the results mean specifically to your company. Use complete sentences in your own words. Has the current ratio improved?_________________________ 2) Company's Debt ratio 2017 Debt Ratio =0.417987 = 41.799% 2016 Debit Ratio = 0.415240 = 41.524% Explain what information this ratio provides (define), and what the results mean specifically to your company Use complete sentences Has the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT