The document discusses various types of financial ratios used to analyze companies, including liquidity ratios and solvency ratios. It provides examples of key liquidity ratios like the current ratio, quick ratio, and cash ratio. The current ratio measures a company's ability to pay short-term debts with current assets. The quick ratio is similar but excludes inventory from current assets. The cash ratio measures a company's ability to pay debts with cash and cash equivalents. Solvency ratios measure long-term financial health and debt obligations, unlike liquidity ratios which focus on short-term obligations. Examples are provided to demonstrate how to calculate and interpret these important financial metrics.
Solving logarithmic equations and inequalitiesJomaizildjian
This document provides an overview of solving logarithmic equations and inequalities. It begins with an introduction to logarithmic form, the definition of logarithms, and properties of exponents and logarithms. Examples are then shown for solving different types of logarithmic equations using properties of logarithms and changing forms between logarithmic and exponential. Strategies discussed include rewriting in exponential form, using logarithmic properties, applying the one-to-one property, and using the zero factor property. Finally, properties of logarithmic inequalities are discussed and examples are shown for solving logarithmic inequalities. The document concludes with assigning students to study graphing logarithmic functions.
The document defines and provides examples of polynomial functions. It discusses that a polynomial is a sum of monomials with whole number exponents. A polynomial function can be written in standard form as a polynomial equation with variables and coefficients. The degree of a polynomial is the highest exponent, and the leading coefficient is the coefficient of the term with the highest degree. Examples are provided of evaluating polynomial functions for different variable values.
A government imposed price control, like rent control, can result in shortages as seen in crowded grocery store lines during times of price controls in Europe. A price floor, like a minimum wage, sets a price above the equilibrium price and results in a surplus of the good. For example, a minimum wage leads to higher unemployment rates for younger, unskilled workers. A price ceiling sets a price below the equilibrium price and results in a shortage of the good, like limitations on concert ticket scalping creating a shortage. [/SUMMARY]
This document discusses integral exponents and how to evaluate expressions with zero and negative exponents. It provides examples of simplifying expressions with zero and negative exponents by using the definition that a negative exponent means to take the reciprocal of the base and raise it to the positive value of the exponent. It also explains that any nonzero number raised to the zero power is equal to 1, and expressions should be rewritten with only positive exponents.
The document explains the midline theorem in geometry. The midline theorem states that the segment joining the midpoints of two sides of a triangle is parallel to the third side and half its length. The document provides examples of applying the midline theorem to solve for unknown lengths in various triangles. It also includes a short quiz testing understanding of using the midline theorem.
At the end of this module, you are expected to:
1. explain the role of self-discipline in maintaining positive self-concept;
2. analyze how self-discipline reflects one’s action; and
3. narrate insights on applying self-discipline in facing personal changes.
Representing Real-Life Situations Using Rational Functions.pptxEdelmarBenosa3
This document discusses polynomial and rational functions. A polynomial function of degree n can be written as p(x) = anxn + an-1xn-1 + ... + a1x + a0, where the coefficients a0, a1, ..., an are real numbers and an ≠ 0. A rational function is defined as f(x) = p(x)/q(x), where p(x) and q(x) are polynomial functions and q(x) ≠ 0. Several examples are provided of using rational functions to model real-world situations involving distance-time, concentration of a drug over time, and allocating a budget amount per child based on the total number of children.
Solving logarithmic equations and inequalitiesJomaizildjian
This document provides an overview of solving logarithmic equations and inequalities. It begins with an introduction to logarithmic form, the definition of logarithms, and properties of exponents and logarithms. Examples are then shown for solving different types of logarithmic equations using properties of logarithms and changing forms between logarithmic and exponential. Strategies discussed include rewriting in exponential form, using logarithmic properties, applying the one-to-one property, and using the zero factor property. Finally, properties of logarithmic inequalities are discussed and examples are shown for solving logarithmic inequalities. The document concludes with assigning students to study graphing logarithmic functions.
The document defines and provides examples of polynomial functions. It discusses that a polynomial is a sum of monomials with whole number exponents. A polynomial function can be written in standard form as a polynomial equation with variables and coefficients. The degree of a polynomial is the highest exponent, and the leading coefficient is the coefficient of the term with the highest degree. Examples are provided of evaluating polynomial functions for different variable values.
A government imposed price control, like rent control, can result in shortages as seen in crowded grocery store lines during times of price controls in Europe. A price floor, like a minimum wage, sets a price above the equilibrium price and results in a surplus of the good. For example, a minimum wage leads to higher unemployment rates for younger, unskilled workers. A price ceiling sets a price below the equilibrium price and results in a shortage of the good, like limitations on concert ticket scalping creating a shortage. [/SUMMARY]
This document discusses integral exponents and how to evaluate expressions with zero and negative exponents. It provides examples of simplifying expressions with zero and negative exponents by using the definition that a negative exponent means to take the reciprocal of the base and raise it to the positive value of the exponent. It also explains that any nonzero number raised to the zero power is equal to 1, and expressions should be rewritten with only positive exponents.
The document explains the midline theorem in geometry. The midline theorem states that the segment joining the midpoints of two sides of a triangle is parallel to the third side and half its length. The document provides examples of applying the midline theorem to solve for unknown lengths in various triangles. It also includes a short quiz testing understanding of using the midline theorem.
At the end of this module, you are expected to:
1. explain the role of self-discipline in maintaining positive self-concept;
2. analyze how self-discipline reflects one’s action; and
3. narrate insights on applying self-discipline in facing personal changes.
Representing Real-Life Situations Using Rational Functions.pptxEdelmarBenosa3
This document discusses polynomial and rational functions. A polynomial function of degree n can be written as p(x) = anxn + an-1xn-1 + ... + a1x + a0, where the coefficients a0, a1, ..., an are real numbers and an ≠ 0. A rational function is defined as f(x) = p(x)/q(x), where p(x) and q(x) are polynomial functions and q(x) ≠ 0. Several examples are provided of using rational functions to model real-world situations involving distance-time, concentration of a drug over time, and allocating a budget amount per child based on the total number of children.
The document provides definitions for various healthcare-related terms:
1. A pulmonologist is a doctor who specializes in respiratory disorders.
2. Acupuncture is an alternative medicine practice involving inserting needles into the body.
3. Quackery involves selling ineffective health products through fraudulent advertising.
The rest of the document defines nurse, dentist, PhilHealth, and HMOs.
Consumer theory helps understand how individuals make choices given limited budgets to maximize satisfaction or utility. It assumes consumers are rational and want to maximize utility subject to budget constraints. There are two main approaches - the cardinal and ordinal theories. The cardinal theory assumes utility is quantitatively measurable while the ordinal theory only requires preferences can be ranked. Both use concepts like total utility, marginal utility, indifference curves, and budget constraints to model consumer choice and derive the downward sloping demand curve. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility from each additional unit decreases. This forms the basis for consumer demand curves and many economic implications.
This document defines and provides examples of key statistics used to describe data sets: mean, median, and mode. The mean is the average value, the median is the middle value, and the mode is the most frequent value. These statistics describe the central tendency of the data. Additional statistics like range, variance, and standard deviation are used to describe the dispersion or variability of values around the central tendency. The standard deviation specifically measures how far data values typically are from the mean.
This document discusses marginal utility analysis and consumer behavior theory. It defines key concepts like total utility, marginal utility, diminishing marginal utility, and explains how consumers seek to maximize utility given budget constraints. The document also discusses how consumers reach equilibrium when purchasing multiple goods, where the marginal utility per rupee is equal across goods. It shows how demand curves can be derived from marginal utility curves and outlines some limitations of the marginal utility approach.
Lucky Me! targets the general public aged 4-50 with its instant noodle products. It holds a dominant 59% market share. Lucky Me! differentiates itself through its wide variety of flavors and claim of having no artificial preservatives. It uses TV ads, celebrity endorsements, and family-focused advocacy events to promote its products, which are distributed nationwide. Lucky Me! pursues a differentiation strategy through product innovation to maintain its leadership in the noodles market.
This document defines and provides examples of sets and basic set operations. It introduces sets as collections of objects without duplication or regard for order. It describes properties of sets like subsets, the empty set, cardinality, and power sets. The document also defines Cartesian products as ordered tuples from multiple sets and set operations like union and intersection. Examples are provided to illustrate set membership, subsets, Cartesian products, and how union and intersection combine sets.
Scoops Ice Cream Parlor proposes to open an ice cream shop as a sole proprietorship. The proposal outlines goals to gain 50% market share in the first year, recover 50% of the initial investment in six months, and build long-term customer relationships. It provides details on the management structure, estimated salaries, startup costs, and financial projections. The marketing plan discusses competitors and includes strategies for public relations, sales promotions, and direct marketing to create awareness and capture 60% of the target market within the first year.
1. The document discusses concepts related to consumer choice theory including utility, total utility, marginal utility, budget constraints, indifference curves, and how consumer choices are impacted by changes in income and prices.
2. It provides illustrations of budget constraints, indifference curves, and how consumers optimize their choices of goods at the point where the highest indifference curve is tangent to the budget constraint.
3. It also explains how increases in income shift the budget constraint outward, allowing consumers to consume more goods, and how decreases in price rotate the budget constraint outward and impact substitution between goods.
Mang Inasal targets family breadwinners who want affordable fast food for their families. It recognizes Filipinos' love for rice by offering unlimited rice and soup. Mang Inasal competes in the P108 billion fast food industry against Jollibee, McDonald's, and KFC. It differentiates itself by being the most affordable option and having 380 branches nationwide that offer Filipino foods like inasal chicken coupled with unlimited rice and soup.
This document discusses consumer choice and how consumption changes in response to changes in income and price. It covers:
- How an increase in income leads to an increase in consumption of normal goods but a decrease for inferior goods.
- How an increase in price leads to a decrease in quantity demanded through both substitution and income effects. These effects can be analyzed separately using compensating variations.
- The difference between normal, inferior, and Giffen goods based on whether the income or substitution effect dominates in response to a price change.
- How to construct demand curves, price-consumption curves, and Engel curves from indifference curves and budget constraints.
This document discusses different types of market structures: pure competition, monopoly, monopolistic competition, and oligopoly. It provides key characteristics of each structure, including the number and size of buyers and sellers, product differentiation, barriers to entry/exit, and pricing behavior. Pure competition has many small firms and sellers producing homogeneous products. A monopoly has a single seller of unique products with no close substitutes. Monopolistic competition features many firms making differentiated products. Oligopoly involves a small number of large firms producing standardized or differentiated goods.
Before you start writing your coffee shop business plan, spend as much time as you can to reading through some samples of a coffee shop or food and restaurant business plans. Not only will that give you a good idea of what it is you’re aiming for, but it will also show you the different sections that different entrepreneurs include and the language they use to write about themselves and their future plans.
We have created a sample coffee shop business plan example for you to get a good idea about how a perfect coffee shop business plan should look like and what details you should include in your business plan.
Source: https://upmetrics.co/template/coffee-shop-business-plan-example
1. Financial management deals with decisions that maximize shareholder wealth through activities like financing, investing, and dividend policies.
2. The organizational structure of a company establishes clear roles and responsibilities in decision making, with the shareholders' interest in wealth maximization flowing down through boards of directors and managers.
3. Financial institutions like banks and insurance companies link savers and users of funds by collecting deposits and premiums for investment and lending.
Topic 2 tools techniques of managing of inventoriesRAJKAMAL282
This document defines key terms related to inventory management, accounts receivable, accounts payable, and cash. It discusses the cash operating cycle and how it reflects a firm's investment in working capital. Key aspects of the operating cycle include raw materials, work in progress, finished goods, and receivables collection periods. Relevant accounting ratios for analyzing financial statements like the current ratio and quick ratio are also defined. Inventory management techniques are mentioned.
Ratio analysis is a quantitative method of analyzing financial statements to assess a company's liquidity, turnover, solvency, and profitability. It involves calculating key financial ratios and comparing them over time and against industry benchmarks. Common ratios include current ratio, quick ratio, debt-to-equity ratio, profit margin, and return on assets. Ratio analysis provides valuable insights into a company's financial health and performance.
The document provides definitions for various healthcare-related terms:
1. A pulmonologist is a doctor who specializes in respiratory disorders.
2. Acupuncture is an alternative medicine practice involving inserting needles into the body.
3. Quackery involves selling ineffective health products through fraudulent advertising.
The rest of the document defines nurse, dentist, PhilHealth, and HMOs.
Consumer theory helps understand how individuals make choices given limited budgets to maximize satisfaction or utility. It assumes consumers are rational and want to maximize utility subject to budget constraints. There are two main approaches - the cardinal and ordinal theories. The cardinal theory assumes utility is quantitatively measurable while the ordinal theory only requires preferences can be ranked. Both use concepts like total utility, marginal utility, indifference curves, and budget constraints to model consumer choice and derive the downward sloping demand curve. The law of diminishing marginal utility states that as consumption of a good increases, the marginal utility from each additional unit decreases. This forms the basis for consumer demand curves and many economic implications.
This document defines and provides examples of key statistics used to describe data sets: mean, median, and mode. The mean is the average value, the median is the middle value, and the mode is the most frequent value. These statistics describe the central tendency of the data. Additional statistics like range, variance, and standard deviation are used to describe the dispersion or variability of values around the central tendency. The standard deviation specifically measures how far data values typically are from the mean.
This document discusses marginal utility analysis and consumer behavior theory. It defines key concepts like total utility, marginal utility, diminishing marginal utility, and explains how consumers seek to maximize utility given budget constraints. The document also discusses how consumers reach equilibrium when purchasing multiple goods, where the marginal utility per rupee is equal across goods. It shows how demand curves can be derived from marginal utility curves and outlines some limitations of the marginal utility approach.
Lucky Me! targets the general public aged 4-50 with its instant noodle products. It holds a dominant 59% market share. Lucky Me! differentiates itself through its wide variety of flavors and claim of having no artificial preservatives. It uses TV ads, celebrity endorsements, and family-focused advocacy events to promote its products, which are distributed nationwide. Lucky Me! pursues a differentiation strategy through product innovation to maintain its leadership in the noodles market.
This document defines and provides examples of sets and basic set operations. It introduces sets as collections of objects without duplication or regard for order. It describes properties of sets like subsets, the empty set, cardinality, and power sets. The document also defines Cartesian products as ordered tuples from multiple sets and set operations like union and intersection. Examples are provided to illustrate set membership, subsets, Cartesian products, and how union and intersection combine sets.
Scoops Ice Cream Parlor proposes to open an ice cream shop as a sole proprietorship. The proposal outlines goals to gain 50% market share in the first year, recover 50% of the initial investment in six months, and build long-term customer relationships. It provides details on the management structure, estimated salaries, startup costs, and financial projections. The marketing plan discusses competitors and includes strategies for public relations, sales promotions, and direct marketing to create awareness and capture 60% of the target market within the first year.
1. The document discusses concepts related to consumer choice theory including utility, total utility, marginal utility, budget constraints, indifference curves, and how consumer choices are impacted by changes in income and prices.
2. It provides illustrations of budget constraints, indifference curves, and how consumers optimize their choices of goods at the point where the highest indifference curve is tangent to the budget constraint.
3. It also explains how increases in income shift the budget constraint outward, allowing consumers to consume more goods, and how decreases in price rotate the budget constraint outward and impact substitution between goods.
Mang Inasal targets family breadwinners who want affordable fast food for their families. It recognizes Filipinos' love for rice by offering unlimited rice and soup. Mang Inasal competes in the P108 billion fast food industry against Jollibee, McDonald's, and KFC. It differentiates itself by being the most affordable option and having 380 branches nationwide that offer Filipino foods like inasal chicken coupled with unlimited rice and soup.
This document discusses consumer choice and how consumption changes in response to changes in income and price. It covers:
- How an increase in income leads to an increase in consumption of normal goods but a decrease for inferior goods.
- How an increase in price leads to a decrease in quantity demanded through both substitution and income effects. These effects can be analyzed separately using compensating variations.
- The difference between normal, inferior, and Giffen goods based on whether the income or substitution effect dominates in response to a price change.
- How to construct demand curves, price-consumption curves, and Engel curves from indifference curves and budget constraints.
This document discusses different types of market structures: pure competition, monopoly, monopolistic competition, and oligopoly. It provides key characteristics of each structure, including the number and size of buyers and sellers, product differentiation, barriers to entry/exit, and pricing behavior. Pure competition has many small firms and sellers producing homogeneous products. A monopoly has a single seller of unique products with no close substitutes. Monopolistic competition features many firms making differentiated products. Oligopoly involves a small number of large firms producing standardized or differentiated goods.
Before you start writing your coffee shop business plan, spend as much time as you can to reading through some samples of a coffee shop or food and restaurant business plans. Not only will that give you a good idea of what it is you’re aiming for, but it will also show you the different sections that different entrepreneurs include and the language they use to write about themselves and their future plans.
We have created a sample coffee shop business plan example for you to get a good idea about how a perfect coffee shop business plan should look like and what details you should include in your business plan.
Source: https://upmetrics.co/template/coffee-shop-business-plan-example
1. Financial management deals with decisions that maximize shareholder wealth through activities like financing, investing, and dividend policies.
2. The organizational structure of a company establishes clear roles and responsibilities in decision making, with the shareholders' interest in wealth maximization flowing down through boards of directors and managers.
3. Financial institutions like banks and insurance companies link savers and users of funds by collecting deposits and premiums for investment and lending.
Topic 2 tools techniques of managing of inventoriesRAJKAMAL282
This document defines key terms related to inventory management, accounts receivable, accounts payable, and cash. It discusses the cash operating cycle and how it reflects a firm's investment in working capital. Key aspects of the operating cycle include raw materials, work in progress, finished goods, and receivables collection periods. Relevant accounting ratios for analyzing financial statements like the current ratio and quick ratio are also defined. Inventory management techniques are mentioned.
Ratio analysis is a quantitative method of analyzing financial statements to assess a company's liquidity, turnover, solvency, and profitability. It involves calculating key financial ratios and comparing them over time and against industry benchmarks. Common ratios include current ratio, quick ratio, debt-to-equity ratio, profit margin, and return on assets. Ratio analysis provides valuable insights into a company's financial health and performance.
Ratios and Formulas in Customer Financial AnalysisFinancial stat.docxcatheryncouper
Ratios and Formulas in Customer Financial Analysis
Financial statement analysis is a judgmental process. One of the primary objectives is identification of major changes in trends, and relationships and the investigation of the reasons underlying those changes. The judgment process can be improved by experience and the use of analytical tools. Probably the most widely used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items on the financial statement. Financial ratios are usually expressed in percentage or times. Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories:
· Liquidity ratios measure a firm's ability to meet its current obligations.
· Profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business.
· Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time.
· Efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business.
A ratio can be computed from any pair of numbers. Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard computation of them does not exist. The following ratio presentation includes ratios that are most often used when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company driven procedure. Analysts are drawn to and use the ones they are comfortable with and understand.
1. Liquidity Ratios
Working Capital
Working capital compares current assets to current liabilities, and serves as the liquid reserve available to satisfy contingencies and uncertainties. A high working capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm can pay its current liabilities when due.
Formula
Current Assets - Current Liabilities
Acid Test or Quick Ratio
A measurement of the liquidity position of the business. The quick ratio compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation. Consequently, a business's quick ratio will be lower than its current ratio. It is a stringent test of liquidity.
Formula
Cash + Marketable Securities + Accounts Receivable
Current Liabilities
Current Ratio
provides an indication of the liquidity of the business by comparing the amount of current assets to current liabilities. A business's curren ...
Ratios and formulas are important analytical tools for evaluating a company's financial statements. Ratio analysis involves calculating relationships between financial data to assess aspects of a company's operations, such as liquidity, profitability, leverage, efficiency and creditworthiness. Common financial ratios are grouped into categories like liquidity ratios, which measure ability to meet current obligations, and profitability ratios, which evaluate expenses and returns. A standard list of ratios does not exist, as analysts choose those most relevant and understandable for the situation.
accounting important regarding the importance of accounting in accountsbalckstone358
Accounting is the process of recording and reporting financial transactions of a business. It involves keeping records of transactions, analyzing financial data, and ensuring compliance with regulations. Ratio analysis is a quantitative method used to evaluate a company's liquidity, profitability, and operational efficiency by analyzing its financial statements and key ratios in different categories such as liquidity, solvency, profitability, and turnover. Common ratios include the current ratio, debt-to-equity ratio, gross profit ratio, and inventory turnover ratio.
Prepare a witten financial analysis. .This should include calculation.pdfarrowit1
Prepare a witten financial analysis. .This should include calculations and discussion related to
the Chapter 5 appendix (Appendix 5A). See illustration 5A-1 for a summary of financial ratios.
Be sure to include (1) these ratios, (2) what they mean and (3) how you interpret them: o Current
ratio o Accounts receivable turnover o Inventory turnover o Profit margin on sales o Return on
assets o Return on stockholders\' equity o Debt to assets ratio Submit a WORD document via
D2L- Assessments - Assignments
Solution
Ans ) The ratios are not meant for a particular person or firm.People in various fields of life are
interested in ratio analysis from their own angles.The parties attached with business or firm are
creditors i.e. mony lenders, shareholders.Management uses the toolof Ratio analysisto
interpretate the information from their own angles.For example creditors are interested in
liquidity and solvency for which they will make use of current ratio , liquidity ratio,
proprietaryRatio, debt equity Ratio,capital gearing Ratio.Shareholders are interested in
profitability and long term solvency.They want to know the rate of return on their capital
employed for which they willmake use of Gross Profit Ratio, Operating Ratio, Dividend ratio
and Price Earning Ratio.Management is interested in overall efficiency of business which can be
better jud ged through Ratios like turnover to fixed assets, turnover to capital employed, stock
turnover ratio etc.So, from the above discussion it is clear that different prties uses the tool of
Ratio analysis for taking their own decisions
The particular purpose of a user is determining the particular Ratios that might be used ofr
financial analysis.Here we will discuss and calculate various ratios to do fianacial analysis.
Current Ratio = Current Assests/Current Liabilities
Current Assests= Cash + Bank+ Prepaid Insurance+Inventory+ Accounts Recievables
Current Assests=44746.5 +510+500+5000+29000=79756.5
Current Laibilites =Accounts payable
Current Laibilites= 30064.83
Current Ratio = 79756.5/30064.83= 2.7
Interpretation : Generally a current ratio of 2 times or 2:1 is cosidered to be satisfactory.Here the
current ratio of greater than 2 denotes the good liquidity position but it also indicates assest
liabilty mis match.But current ratio greater than 2 is generally preferred as compared to less than
2.
2.Account receivables turnover :It represents the number of times the cash is collected from
debtors.Lower turnover denotes poor collection and means that funds are blocked ofr longer
period of tiem and vice-versa.It also measure the liquidity of the firm.It shows how quickly
debtors (receivables) are converted into sales.The Account receivables turnover shows the
relationship between sales and debtors of the firm.
Account receivables turnover= Net Credit Annual Sales/Average trade debtors
3. Inventory turnover :This ratio indicates the number of times inventory or stock is replaced
during the year.The turnover of invent.
Chapter 6_Interpretation of Financial StatementPresana1
This document provides an overview of ratio analysis for financial statement evaluation. It defines ratios that measure profitability, liquidity, management efficiency, leverage, and valuation/growth. Specific ratios are defined along with their formulas and uses. An example is provided to demonstrate ratio calculations for the Norton Corporation using data on its income statement, balance sheet, and other financial details. Ratios computed include current ratio, acid-test ratio, accounts receivable turnover, inventory turnover, equity ratio, return on sales, return on equity, earnings per share, and price-earnings ratio. The document also outlines advantages and limitations of ratio analysis for stakeholders.
Ratio analysis is used to evaluate a company's operating and financial performance through quantitative analysis of information in its financial statements. Ratios are categorized as liquidity, coverage, solvency, efficiency, and profitability. Liquidity ratios measure a company's ability to meet short-term obligations, coverage ratios measure its ability to service debt, solvency ratios measure its ability to meet short and long-term liabilities, efficiency ratios measure how efficiently a company utilizes its assets, and profitability ratios measure its ability to generate profits. Common ratios include current, quick, and working capital ratios for liquidity; interest coverage and debt service coverage ratios for coverage; debt, equity, and debt-to-equity ratios for solven
This document contains information about an MBA program session from July/August 2021, including course details and student responses to assignments. The assignments include discussing 5 accounting concepts with examples, preparing a trading account, and distinguishing between management accounting and financial accounting. It also includes the balance sheet of a company and calculations of debt-equity and proprietary ratios based on the information provided. The purpose of a cash flow statement is to analyze changes in a company's cash position and the sources and uses of cash. Examples of cash flows include receipts from customers and payments to suppliers for operating activities.
Accounts payable and accounts receivable refer to money owed to and by a business for goods and services. Accrual accounting records income and expenses when incurred rather than when payment is made. Key financial documents include the income statement, balance sheet, and cash flow statement, which provide different perspectives on a company's performance over time. Financial ratios analyze relationships between financial metrics and compare performance to peers. Profitability, leverage, liquidity, and operating efficiency ratios assess different aspects of a company's financial health.
This document provides an overview of financial statement analysis and key metrics used to analyze companies. It defines the key financial statements - the income statement, balance sheet, and statement of cash flows. It then explains various ratios used to evaluate a company's liquidity, leverage, asset utilization, profitability, and market performance, including definitions of ratios like the current ratio, debt-to-equity ratio, inventory turnover, return on assets, and price-to-earnings ratio. Industry averages from sources like RMA and Dun & Bradstreet are also discussed for comparison purposes.
Financial statement analysis is the process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.
small business & epreneurship development U4.pdfkittustudy7
Financial management is vital for small businesses. It involves planning, organizing, and controlling financial activities like cash flow, budgets, and financial reporting to achieve business goals. Effective financial management requires skills in bookkeeping, forecasting, risk assessment, and capital structure optimization. Key aspects of financial management for small businesses include cash flow management, budgeting, and analyzing financial performance metrics like profit margins and return on investment. Common challenges include managing budgets, making payroll, paying bills on time, controlling debt, securing financing, and understanding different financing products.
Accounting concepts and principles provide a framework for financial reporting and ensure users are not misled. Some key concepts are:
- Going concern assumes the business will continue operating indefinitely.
- Entity treats the business and its owners separately.
- Duality means every transaction has two aspects recorded.
- Realization recognizes revenue when goods/services are delivered.
- Matching recognizes revenue and expenses in the periods to which they relate.
Sip 2013 15 main report-kiran mankumbre 110914Kiran Mankumbre
This document provides an executive summary and introduction to analyzing the financial ratios of Dabur India Pvt Ltd. It discusses the objectives of the project, which are to develop a financial model of Dabur and learn about financial modeling and ratio analysis. It introduces the key types of ratios that will be analyzed, including liquidity, profitability, turnover, solvency, and overall profitability ratios. Specific ratios that will be calculated and analyzed include current ratio, quick ratio, gross profit ratio, operating ratio, net profit ratio, return on investment ratio, and return on capital employed ratio.
Ratio analysis advantages and limitations (Complete Chapter)Syed Mahmood Ali
The aim of this PPT's to provide complete knowledge of Ratio Analysis chapter covering all the formula's for any university student of B.com, M.com, BBA and MBA.
The document discusses ratio analysis, which involves calculating and interpreting various financial ratios to evaluate aspects of a company's performance and financial position. It defines key ratios including liquidity ratios, activity ratios, profitability ratios, and leverage ratios. It provides formulas and examples for specific ratios like current ratio, inventory turnover, debt-to-equity ratio, and return on equity. The purpose of ratio analysis is to help assess a company's liquidity, profitability, financial stability, and management quality.
This document provides information about a student's ratio analysis project. It includes an introduction to ratio analysis and its advantages and limitations. It then discusses the different types of ratios, including liquidity ratios, solvency ratios, and profitability ratios. Specific liquidity ratios like current ratio and quick ratio are defined. The document also includes financial statement data from Bank of Baroda and calculations of the current ratio and quick ratio for fiscal years 2020-21, 2019-20, and 2018-19. Definitions of solvency ratios like debt to equity ratio and debt ratio are also provided.
98C H A P T E R3 Measuring Business IncomeI ncome, o.docxevonnehoggarth79783
98
C H A P T E R
3 Measuring Business Income
I ncome, or earnings, is the most important measure of a com-pany’s success or failure. Thus, the incentive to manage, or mis-
state, earnings by manipulating the numbers can be powerful, and
because earnings are based on estimates, manipulation can be easy.
For these reasons, ethical behavior is extremely important when
measuring business income.
L E A R N I N G O B J E C T I V E S
LO1 Define net income, and explain the assumptions underlying
income measurement and their ethical application. (pp. 100–104)
LO2 Define accrual accounting, and explain how it is
accomplished. (pp. 104–106)
LO3 Identify four situations that require adjusting entries, and
illustrate typical adjusting entries. (pp. 107–116)
LO4 Prepare financial statements from an adjusted trial
balance. (pp. 116–119)
LO5 Use accrual-based information to analyze cash flows.
(pp. 119–120)
Making a
Statement
Revenues
– Expenses
= Net Income
INCOME STATEMENT
STATEMENT OF
OWNER’S EQUITY
Beginning Balance
+ Net Income
– Withdrawals
= Ending Balance
BALANCE SHEET
Assets Liabilities
Owner’s
Equity
A = L + OE
STATEMENT OF CASH FLOWS
= Ending Cash Balance
Operating activities
+ Investing activities
+ Financing activities
= Change in Cash
+ Beginning Balance
Adjusting entries affect the
balance sheet and income
statement but not the
statement of cash flows.
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Title: Principles of Accounting Server: Jobs
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99
� What assumptions must Reliable
Answering Service make to
account for transactions that
span accounting periods?
� How does Reliable assign its
revenues and expenses to the
proper accounting period so
that net income is properly
measured?
� Why are the adjustments that
these transactions require
important to Reliable’s financial
performance?
DECISION POINT � A USER’S FOCUS
RELIABLE ANSWERING
SERVICE
99
Reliable Answering Service takes telephone messages for doctors,
lawyers, and other professionals and relays them immediately when
they involve an emergency. At the end of any accounting period,
Reliable has many transactions that will affect future periods. Exam-
ples appear in the company’s trial balance on the following page.
They include office supplies and prepaid expenses, which, though paid
in the period just ended, will benefit future periods and are there-
fore recorded as assets. Another example is unearned revenue, which
represents receipts for services the company will not perform and
earn until a future period. If.
Similar to Module 20 - Understanding Financial & Liquidity Ratios.pptx (20)
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Accurate understanding of land use and cover is imperative for the development planning
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2. Financial ratios are created with the use
of numerical values taken from financial
statements to gain meaningful
information about a company. The
numbers found on a company’s financial
statements – balance sheet, income
statement, and cash flow statement – are
used to perform quantitative analysis and
assess a company’s liquidity, leverage,
growth, margins, profitability, rates of
return, valuation, and more.
Understanding
Financial Ratios
4. • Liquidity ratios are financial ratios that
measure a company’s ability to repay
both short- and long-term obligations.
• The liquidity ratios are a result of
dividing cash and other liquid assets by
short-term borrowings and current
liabilities. They show the number of
times the short-term debt obligations
are covered by the cash and liquid
assets. If the value is greater than 1, it
means the short-term obligations are
fully covered.
1. Understanding
Liquidity Ratios
5. Types of Liquidity Ratios
Current
Ratio
Quick
Ratio
Cash
Ratio
Operating
Cash Flow
Ratio
01
02 03
04
6. Current Ratio
The current ratio measures a company’s ability to pay off short-term liabilities
with current assets:
The current ratio is probably the best known and most often used of the
liquidity ratios, which analysts and investors use to evaluate the firm's ability
to pay its short-term debt obligations, such as accounts payable (payments to
suppliers) and taxes and wages. Short-term notes payable to a bank, for
example, may also be relevant.
01
Current ratio
= Current assets / Current liabilities
7. Quick Ratio
The quick ratio measures a company’s ability to pay off short-term liabilities
with quick assets:
The quick ratio is an indicator of a company’s short-term liquidity position and
measures a company’s ability to meet its short-term obligations with its most
liquid assets. Since it indicates the company’s ability to instantly use its near-
cash assets (assets that can be converted quickly to cash) to pay down its
current liabilities, it is also called the acid test ratio. An "acid test" is a slang
term for a quick test designed to produce instant results.
02
Quick ratio
= Current assets - Inventories / Current liabilities
8. Cash Ratio
The cash ratio measures a company’s ability to pay off short-term liabilities
with cash and cash equivalents:
The cash ratio is a measurement of a company's liquidity. It specifically
calculates the ratio of a company's total cash and cash equivalents to its
current liabilities. The metric evaluates company's ability to repay its short-
term debt with cash or near-cash resources, such as easily marketable
securities. This information is useful to creditors when they decide how much
money, if any, they would be willing to loan a company.
03
Cash ratio
Cash and Cash equivalents / Current Liabilities
9. Operating Cash Flow Ratio
The operating cash flow ratio is a measure of the number of times a company
can pay off current liabilities with the cash generated in a given period:
The operating cash flow ratio is a measure of how readily current liabilities are
covered by the cash flows generated from a company's operations. This ratio
can help gauge a company's liquidity in the short term. Using cash flow as
opposed to net income is considered a cleaner or more accurate measure
since earnings are more easily manipulated.
04
Operating cash flow ratio
= Operating cash flow / Current liabilities
11. Gross Profit
Margin
Gross profit margin is metric analysts use to assess a
company's financial health by calculating the amount of
money left over from product sales after subtracting the cost
of goods sold (COGS). Sometimes referred to as the gross
margin ratio, the gross profit margin is frequently expressed as
a percentage of sales.
01
What does it tell you
If a company's gross profit margin wildly fluctuates, this may signal poor management practices and/or
inferior products. Such fluctuations may be justified in cases where a company makes sweeping operational
changes to its business model, in which case temporary volatility should be no cause for alarm. E.g. if a
company decides to automate certain supply chain functions, the initial investment may be high, but the
cost of goods ultimately decreases due to the lower labour costs.
How to calculate
A company's gross profit margin percentage is calculated by first subtracting the cost of goods sold (COGS)
from net sales (gross revenues minus returns, allowances, and discounts). This figure is then divided by net
sales, to calculate the gross profit margin in percentage terms.
Formula
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 − 𝐶𝑂𝐺𝑆
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
12. Operating
Profit
Margin
A slightly more complex metric, operating profit also takes into
account all overhead, operating, administrative and sales expenses
necessary to run the business on a day-to-day basis. While this figure
still excludes debts, taxes, and other non-operational expenses, it
does include the amortization and depreciation of assets.
02
What does it tell you
A company's operating profit margin ratio tells you how well the company's operations contribute to its
profitability. A company with a substantial profit margin ratio makes more money on each EURO of sales than
a company with a narrow profit margin.
How to calculate
1.Find the operating income (EBIT) by subtracting its operational expenses, allocated depreciation, and
amortization amounts from gross income.
2.Find the net sales revenue. This requires no calculation because the sales shown on the company's income
statement are net sales. If that figure is unavailable, you can calculate net sales by taking the company's
gross sales and subtracting its sales returns, allowances for damaged goods, and any discounts offered.
3.Calculate the operating profit margin ratio by dividing the figure from step one (operating income) by the
figure from step two (net sales).
Formula
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑣𝑒𝑛𝑢𝑒
∗ 100
13. Net Profit
Margin
The net profit margin can be used to compare performance
over different periods. However, this only reveals reliable
results if nothing else has changed in your expenses.
03
What does it tell you
The net profit margin can indicate how well the company converts its sales into profits. This means that the
percentage calculated is the percent of your revenues that are profitable. It also indicates the amount of
revenue you are spending to produce your products or services.
How to calculate
1. You'll have to calculate net profit and net sales, as there are generally no line items labelled as such on
the income statement. Net profit is calculated by subtracting all of your expenses from your revenues.
These include wages, salaries, utilities, or other expenses.
2. Net sales are the result of subtracting your allowances, returns, and discounts from your total revenue.
Allowances stem from problems with a product or service which required you to reduce the price to
satisfy the customer. A return is the return of an item or a refund for a service.
Formula
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡𝑠
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
∗ 100
14. Important
Financial Ratios:
Current Ratio
The current ratio is probably the best known and most often
used of the liquidity ratios, which analysts and investors use to
evaluate the firm's ability to pay its short-term debt
obligations, such as accounts payable (payments to suppliers)
and taxes and wages. Short-term notes payable to a bank, for
example, may also be relevant.
04
What does it tell you
Current ratio shows how many times over the firm can pay its current debt obligations based on its current,
most liquid assets. If a business firm has €200 in current assets and €100 in current liabilities, the calculation
is €200/€100 = 2.00X. The "X" (times) part at the end means that the firm can pay its current liabilities from
its current assets two times over. This is a good financial position for a firm, meaning that it can meet its
short-term debt obligations with no stress. If the current ratio is less than 1.00X, then the firm would have a
problem covering its monthly bills. A higher current ratio is typically better than a lower current ratio with
regard to maintaining liquidity.
How to calculate
The current ratio is calculated from balance sheet data using the following formula:
Formula
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
15. Optimisation of inventory
management / Stock
reduction
01. Inventory
Selling of Receivables to
reduce the time to receipt
of money and the default
risks
02. Factoring
Reduction of
payment terms /
consequent
management of
receivables
04. Receivables Management
Outsourcing of non-
core functions to
reduce fixed
costs
03. Outsourcing
Sale of fixed
assets and
lease back
05. Sale +
Lease Back
Managing Liquidity
To overcome a liquidity crisis, the
liquidity reserves still available in the
company must be mobilised and any
remaining gaps must be closed
externally, either by injecting liquid
funds or through standstill
agreements with creditors.
The recovery of sufficient
creditworthiness also requires that
the company can improve its rating
and provide sufficient guarantees
In addition to additional loans or
shareholder contributions, the
following possibilities are worth
mentioning
16. It is extremely difficult to acquire outside capital in advanced crisis
phases. Banks are often no longer able to become active due to risk
regulations. In principle, financiers in a crisis demand plausible restructuring
concepts, sufficient securities, and higher interest rates.
Managing
Liquidity
Leasing
Loans from Customers
advance payments
New loans from Financiers
(seasonal loans / bridging loans)
Supplier Credit
Deferment and Waiver
by third parties
Factoring
Shareholder Loan (Equity)
DEBT
CAPITAL
04
02
03
01
05
06
07
17. A solvency ratio is a key metric used
to measure an enterprise’s ability to
meet its long-term debt obligations
and is used often by prospective
business lenders. A solvency ratio
indicates whether a company’s cash
flow is sufficient to meet its long-
term liabilities and thus is a measure
of its financial health. An
unfavorable ratio can indicate some
likelihood that a company will
default on its debt obligations.
2. Understanding
Solvency Ratios
19. • Solvency ratios and liquidity ratios are similar but have
some important differences. Both of these categories
of financial ratios will indicate the health of a company.
The main difference is that solvency ratios offer a longer-
term outlook on a company whereas liquidity ratios focus
on the shorter term.
• Solvency ratios look at all assets of a company, including
long-term debts such as bonds with maturities longer
than a year. Liquidity ratios, on the other hand, look at
just the most liquid assets, such as cash and marketable
securities, and how those can be used to cover upcoming
obligations in the near term.
Solvency Ratios vs. Liquidity Ratios
21. Examples Using Liquidity Ratios
Current
Ratio -
Example
Quick Ratio -
Example
Cash
Ratio
Example
01
02 03
22. Current Ratio - Example
We have two companies – Company X and Company Y and both have the
same current ratio of 1.00.
Over time, company X is running into too much debt or is running out of cash.
If it gets worse, both can turn into solvency issues. On the other hand,
consequently, company Y is seen in a positive trend, which may indicate faster
turnover, better paybacks, or that the company was able to reduce debt.
Another factor to consider is that if the current ratio of a company – let’s say
company X, in this case, is more volatile, and shifts from 1.35 to 1.05 in a year,
it indicates increased operational risk and can undermine the value of the
company.
01
23. Current Ratio - Example
Below is the calculation of the quick ratio based on the figures that appear on
the balance sheets of two leading competitors operating in the personal care
industrial sector, P&G and J&J, for the fiscal year ending in 2021.
02
(in $millions) Procter & Gamble Johnson & Johnson
Quick Assets (A) $15,013 $46,891
Current Liabilities (B) $33,132 $45,226
Quick Ratio (A/B) 0.45 1.04
24. Current Ratio - Example
With a quick ratio of over 1.0, Johnson &
Johnson appears to be in a decent position to
cover its current liabilities as its liquid assets are
greater than the total of its short-term debt
obligations. Procter & Gamble, on the other
hand, may not be able to pay off its current
obligations using only quick assets as its quick
ratio is well below 1, at 0.45.
This shows that disregarding profitability or
income, Johnson & Johnson appears to be in
better short-term financial health with respect
to being able to meet its short-term debt
requirements.
02
25. Cash Ratio - Example
Company A’s balance sheet lists the following items:
• Cash: €10,000
• Cash equivalents: €20,000
• Accounts receivable: €5,000
• Inventory: €30,000
• Property & equipment: €50,000
• Accounts payable: €12,000
• Short-term debt: € 10,000
• Long-term debt: € 20,000
CASH RATIO = €10,000 + €20,000 = 1.36
€12,000 + €10,000
03
The figure above
indicates that
Company A possesses
enough cash and cash
equivalents to pay off
136% of its current
liabilities. Company A
is highly liquid and
can easily fund its
debt.