Answer:
Current ratio: relationship between short-term assets and short-term liabilities
[tex]\frac{current \: assets}{current \: liaiblities}[/tex]
acid-test ratio it removes the inventory from the above calculation to check the presure to sale from the firm
[tex]\frac{current \: assets - inventory}{current \: liaiblities}[/tex]
(3)
[tex]\frac{365}{AR \: TO} = $Sales period[/tex]
We first, solve for the accounts receivables turnover which is the times we collect the receivables and then, we divide over the days in a year to know the days outstanding
(4)
[tex]\frac{COGS}{Average Inventory} = $Inventory Turnover[/tex]
To calculate the times the inventory was sold during the period
(5)
[tex]\frac{365}{Inventory \: TO} = $Sales period[/tex]
We first, solve for the inventory turnover which is the times we sale the goods and then, we divide over the days in a year to know the days it takes to leave the inventory
(6) [tex]\frac{Liabilities}{Equity} = $Debt-to-equity[/tex]
Relationship between own fund and borrowing
above one it means the company is leverage for third parties more than own fund
(7)
[tex]\frac{EBIT}{Interest \: expense} = TIE[/tex]
we make this division of the earning before interest and taxes against our interest expense.
This compares the operating income against the interest expense we got for borrowing below zero is a serious problem as the company falls to meet the interest of his debt
(8)
[tex]\frac{Net \: Income}{Sales} = Profit \: Margin[/tex]
(9)
[tex]\frac{Sales}{Assets} = Assets \: TO[/tex]
How the assets were managed to create sales for the firm
(10)
[tex]\frac{EBIT}{Assets} = Assets \: Return[/tex]
This will let us know how well we manage our assets as it link the income with the asset used to generated
(11)
[tex]\frac{Net \: Income}{Equity} = Equity \: Return[/tex]
This will let us know how much we generate from the investment made.
Explanation:
