Jesie Ree Angel Bajao

In a nutshell

WEEK 8-9 ULO n,o

1. In getting the return on equity, net income should be divided by the total equity capital or other
formula would be return on assets multiplied by equity multiplier.
2. Equity multiplier is used to measure the assets of a firm that is financed though their
stockholder’s equity or debt.
3. Off-balance sheet items are assets or liabilities that cannot be seen on the balance sheet of a
company but it is still included as assets or liabilities of the company although it is not recorded
on the balance sheet.
4. If there is an increase in the asset’s account or decrease in liability account then it is a use of
cash but those activities that involves spending of cash is called uses of cash.
5. Similar to uses or use of cash, it is called as source of cash if there is an increase in the liability
account and a decrease in the asset account while sources of cash are those activities that
involves bringing in the cash.
6. The difference between the use of cash and the source of cash is that there is an increase in the
asset account but the latter involves a decrease of the asset account.
7. Financial ratios is the ratio that compares the relationship of different financial information such
as the total sales and the total income.
8. In getting the current ratio, the total current assets is divided by the total current liabilities
which gives mainly the company and idea on how to pay back it’s short –term liabilities with it’s
short-term assets.
9. In getting the operating profit margin, EBIT is divided by the total revenue or operating income
is divided by the total revenue.
10. Debt-to equity ratio is the ratio that is used to determine whether the company is reliant on
their borrowings or their capital in funding assets, which can be solved by dividing total debt and
the total equity of the company.