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Transcript of Investment ratios
Predicting the future is what finaical
statements analysis is all about... A liquid asset is one that trades in an acitve market and hence can be quickly converted to cash at the going market price... Main question... Will the firm be able to pay off its debts as they come due in the coming years? Current Rato Current ratio=
Current assets/Current liabilities So what does this mean? Quick Ratio Quick Ratio=
(Current Assets - Invetories)/ Current Liabilities ratio< 1 your in trouble
ratio> 1 in good shape
These measure how effectively the firm is managing its assets. You ask... Does the amount of each typy of asset seem reasonable, too high, or too low in view of current and projected sales? Inventory Turnover Ratio=
Sales/ Inventories how quick is the company turning over their inventory based on their sales? Day Sales Outstanding = Receivables / Average sales per day how quickly are they getting paid?