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Statement of the Assignment: Please prepare a comprehensive list of financial ratios as introduced in Chapter 3...

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Finance

Statement of the Assignment:

Please prepare a comprehensive list of financial ratios asintroduced in Chapter 3 of the textbook. Write a brief explanationbelow each financial ratio, e.g. what does the financial ratiomeasures or what the significance of it is.

For example:

Current Ratio = Current Assist / Current Liabilities

Current ratio measures whether our current assets, ifliquidated, are sufficient to pay all of our current liabilities. ACR of 1.5, for example, shows that if we were to liquidate all ofour current assets, we will be able to cover 1.5x our currentliabilities, whereas a CR of 0.5 shows that liquidating our currentassets only covers half of our current liabilities.

Answer & Explanation Solved by verified expert
3.7 Ratings (395 Votes)
Financial Ratios A ratio is an arithmetical relationship between two figuresFinancial ratio analysis is a study of ratios between various items or group of items in financial statements These ratios are classified in several ways We can divide then 5 broad categories as follows Liquidity Ratio Leverage Ratio Turnover Ratio Profitability Ratio Valuation Ratio 1 Liquidity Ratios Liquidity refers to the ability of a firm to meet its obligations in the short run usually one year It is based on the relationship between current assets and current liabilities The important liquidity ratios are current ratio acidtest ratio and cash ratio Current ratio A very popular ratio the current ratio is defined as the ratio of current asset to current liabilities Current AssetsCurrent Liabilities Current assets include cash current investment trade receivables inventories loans and advances and prepaid expenses Current liabilities represent    See Answer
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