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FINANCIAL RATIOS :Liquidity Ratios (1)

A - Current ratio = Current assets / Current Liabi ities ! - "ui#$ or A#id ratio = (Current assets % In&entory) / Current Liabi ities C- Cas' ratio = (CA % IN() % AR) / CL

Liquidity o* AR:
- A&era+e Co e#tion ,eriod (AC,) = (!a an#e o* AR - ./0) / Credit Sa es I* #redit sa es not +i&en1 assu2e a sa es are #redit

Liquidity o* In&entory:
- A&era+e se in+ ,eriod (AS,) 3 A&era+e Co e#tion ,eriod (AC,) AS, = (In&entory - ./0) / CO4S T'e a+er t'e Liquidity o* IN() T'e +reater t'e need *or #as' to *inan#e o5erations

Condition *or usin+ ratios

1) Current ratios = i* IN() s'ou d be iquidated in ess t'an ./0 days *or a +ood ratio) 6) "ui#$ ratio = iquidation o* AR 7 ./0 Liquidation o* In&entory 8 ./0 .) Cas' ratio = bot' AR 3 In&entory #annot be iquidated in t'e year (2ore t'an ./0) I* bot' are ess t'an ./0 9e use #urrent ratio)

::ebt ;ana+e2ent Ratios (6)

A - :ebt ratio = Tota :ebt / Tota assets ! - :ebt / <quity ratio = Tota :ebt / <quity The Higher the ratios the more risky the Company is C - Ca5ita stru#ture ratio (CSR) = LTL / (LTL 3 O<) : - Interest Co&era+e Ratio = <!IT (<arnin+ be*ore Interest Ta=) / I

:(Assets uti i>ation / 2ana+e2ent (a#ti&ity ratios (.)

A - Tota Assets Turno&er (TAT) = Sa es / Tota assets ! - Fi=ed Assets Turno&er (FAT) = Sa es / FA C - Current Assets Turno&er (CAT) = Sa es / CA :For Cas' To = Sa es / Cas' (1) AR To = Credit Sa es / AR (6) In&entory To = CO4S / In&entory (.) To = Turno&er Liquidity o* AR iquidity o* In&entory

Sa2e as be*ore

(?) ,ro*itabi ity ratios: A- sa es:

1) 4,; +ross 5ro*it 2ar+in = 4, / sa es 6) OI; o5eratin+ in#o2e 2ar+in = OI / sa es = ( Sa es-CO4S -Ot'ers) /
sa es

.) NI; net in#o2e 2ar+in = NI / Sa es !- Finan#ia 5er*or2an#es: 1) Return on assets (in&est2ent) ROI = NI / Tota Assets 6) Return on <quity (RO<) = NI / <quity C- RO!F =@ (ROI Interest / !F) A- (!F/O<)
:- RO< = ROI 3 RO!F