financial ratiosand quality indicators- collegeof charleston（金融ratiosand质量指标——collegeof查尔斯顿）.docVIP

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financial ratiosand quality indicators- collegeof charleston（金融ratiosand质量指标——collegeof查尔斯顿）.doc

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Financial Ratios and Quality Indicators Monitoring ratios on a regular basis provides insight into how effectively a business is being managed. Investors/Lenders also evaluate risk by using several sets of ratios; ratios of assets to liabilities, and ratios of lender-investor dollars to owner-investor dollars. Recognize that ratios are only indicators and that only management can tell the full story about a business. The more adept management is at explaining financial ratios to their Investors/Lenders, the better they will understand your business. Key Indicators with their definitions, formula and analysis comments are discussed in the following pages: Page 2 Liquidity: Financial ratios in this category measure the companys capacity to pay its debts as they come due. Current Ratio Quick Ratio Page 3 Safety: Financial ratios in this category are indicators of the businesses vulnerability to risk. Creditors to determine the ability of the business to repay loans often use these ratios. Debt To Equity Debt Coverage Ratio Page 4 – 5 Profitability: The ratios in this section measure the ability of the business to make a profit. Sales Growth COGS to Sales Gross Profit Margin SGA To Sales Net Profit Margin Return On Equity Return On Assets Page 6 - 7 Efficiency: Also called Asset Management ratios. Indicator of how efficiently the company manages its assets. Days In Receivables Accounts Receivable Turnover Days In Inventory Inventory Turnover Sales To Total Assets Days In Accounts Payable Accounts Payable Turnover LIQUIDITY Financial ratios in this category measure the companys capacity to pay its debts as they come due. Current Ratio Definition: The ratio between all current assets and all current liabilities; another way of expressing liquidity. Formula: ?Current Assets / Current Liabilities Analysis: 1:1 current ratio means; the company has $1.00 in current assets to cover each $1.00 in current liabilities. Look for a current ratio above 1: