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Jbb statements
- 4. Current Ratio 2.41 2.23 2.05 1.84 2008 2009 2010 2011
- 5. Quick Ratio 1.12 1.19 1.06 0.79 2008 2009 2010 2011
- 6. Cash Ratio 0.93 0.99 0.84 0.55 2008 2009 2010 2011
- 7. 7.60% 5.62% -3.21% 2008 2010 2011
- 8. 1.89 1.85 1.63 1.39 2008 2009 2010 2011
Editor's Notes
- #5 Current Ratio is calculated by dividing the Current Assets of a company by its Current Liabilities. It measures whether or not a company has enough cash or liquid assets to pay its current liability over the next fiscal year. The ratio is regarded as a test of liquidity for a company.Typically, short-term creditors will prefer a high current ratio because it reduces their overall risk. However, investors may prefer a lower current ratio since they are more concerned about growing the business using assets of the company. Acceptable current ratios may vary from one sector to another, but generally accepted benchmark is to have current assets at least as twice as current liabilities (i.e. Current Ration of 2 to 1).
- #6 The higher the quick ratio, the better the position of the company. The commonly acceptable current ratio is 1, but may vary from industry to industry. A company with a quick ratio of less than 1 can not currently pay back its current liabilities; it's the bad sign for investors and partners.
- #7 Cash ratio is the most stringent and conservative of the three liquidity ratios (current, quick and cash ratio). It only looks at the company's most liquid short-term assets – cash and cash equivalents – which can be most easily used to pay off current obligations.Cash ratio is calculated by dividing absolute liquid assets by current liabilities:higher cash ratio generally means the company is in better financial shapeCash ratio is not as popular in financial analysis as current or quick ratios, its usefulness is limited. There is no common norm for cash ratio. In some countries a cash ratio of not less than 0.2 is considered as acceptable. But ratio that are too high may show poor asset utilization for a company holding large amounts of cash on its balance sheet.
- #8 ROE is one of the most important financial ratios and profitability metrics. It is often said to be the ultimate ratio or the ‘mother of all ratios’ that can be obtained from a company’s financial statement. It measures how profitable a company is for the owner of the investment, and how profitably a company employs its equity.Historically, the average ROE has been around 10% to 12%, at least in the US and UK. For stable economics, ROEs more than 12-15% are considered desirable. But the ratio strongly depends on many factors such as industry, economic environment (inflation, macroeconomic risks, etc.).The higher the ROE, the better. But a higher ROE does not necessarily mean better financial performance of the company. As shown above, in the DuPont formula, the higher ROE can be the result of high financial leverage, but too high financial leverage is dangerous for a company's solvency.Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder's equity does not include preferred shares.Read more: http://www.investopedia.com/terms/r/returnonequity.asp#ixzz2L1GmZxoGThe return on equity ratio is also referred as “return on net worth” (RONW).
- #9 Debt-to-equity ratio is the key financial ratio and is used as a standard for judging a company's financial standing. It is also a measure of a company's ability to repay its obligations. When examining the health of a company, it is critical to pay attention to the debt/equity ratio. If the ratio is increasing, the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, companies with high debt-to-equity ratios may not be able to attract additional lending capitalOptimal debt-to-equity ratio is considered to be about 1