Question

Explain the kind of information the following financial ratios provide about a firm. Hand-write all responses....

Explain the kind of information the following financial ratios provide about a firm. Hand-write all responses. a. Quick ratio - b. Cash ratio c. Total asset turnover d. Equity multiplier e. Long-term debt ratio f. Times interest earned g. Profit margin h. Return on assets i. Return on equity j. Price-earnings

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Answer #1

1.a. quick ratio is also known as liquid ratio of the firm and it is a reflector of the liquidity position of the firm. It means the ratio of firms liquid asset to its current liabilities.

B. Cash ratio is cash or cash equivalent to total current liabilities of the firm it reflects the quickest repayment ability of the firm in-form of the cash.

C.total turnover ratio is the ratio which reflect the efficiency of the firm in order to to effectively manage assets to maximize its sales. It is used to calculate the efficiency of asset utilisation in sales maximization.

D . Equity multiplier is a financial leverage ratio which is used to calculate the portion of equity into the overall shareholders asset. It is calculated by dividing the company's total assets by shareholders net equity.

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