Students1

Many stakeholders are aware of corporate profitability. A company's financial health is very

important to reinvest, sell, fusion and purchase, fraud case, and market intelligence. Ratios are an

important aspect of assessing business success and financial strength. Ratios provide insights on

the profit, liquidity, financing, expenditure, and management of researchers (Ojala, 2021).

Financial ratios allow us to mark meaningful comparisons of the company’s financial data in two
ways: (1) We can study ratios at different times (for instance, the past 10 years) to compare the

company’s current and previous performance; (2) We can compare the company's ratio with the

ratio of other businesses.

            The company's financial ratios can be divided into four categories, which measure

various forms of financial indicators of the company: liquidity ratio, operating risk ratio, profit

ratio, and efficiency ratio. In this discussion, I will analyze the current ratios and debt ratio which

I think it is the most important ratios.  The current ratio, also known as the operating capital

ratio, evaluates the ability of an enterprise to meet its short-term commitments within one year.

In this ratio, the current total assets are compared with the current total liabilities. The current

ratio focuses on how a company might maximize the liquidity of its existing assets to pay its

debts. The debt ratio, also known as the debt-to-asset ratio, is a leverage ratio that shows how

much of the company’s assets are financed by debt. The greater the ratio, the greater the debt and

financial risks. To make it easy for you, I analyzed two US companies listed on the NASDAQ

stock market in the following table.

Financial Cisco Systems Motorola Solutions's  Explanation

Ratios (as in July 2021) (as in June 2021)

 Current ratio = current Current ratio = current
  assets/current liabilities assets/current liabilities The currently

Current ratio= 39112 / 26257 Current ratio=4660 acceptable ratios for

 
/3184 healthy enterprises
 
Current   differ from industry to
=          1.49
Ratio =          1.46 industry and often

range from 1 to 3.

  Debet Ratio= Debet Ratio=  

  Total Debt / TotalAssets Total Debt / TotalAssets In the calculation of

Debet Ratio = 11526 / 97497 Debet Ratio = 6164 / Debt Ratio, we use
  11131
Total Debt divided by
 
 

Debt Ratio =          0.55 Total Assets.

=          0.12

Relationship between ratios and investors

            The aforementioned ratios can help you select the best stock, grow and even have in a

good way with your portfolio. In fundamental analyses, there are hundreds of financial ratios, but

here we mention only briefly two of the most popular and important ones. Note that a firm

cannot be evaluated or studied correctly by only one ratio.

References:

Ojala, M. (2021). the dollar sign. Financial Ratio Analysis for Companies and Industries. Online

Searcher, 45(2), 39–41.

Keown, A. J., Martin, J. D., & Petty, J. W. (2017). Foundations of finance: The logic and practice of

financial management. Boston: Pearson.

Zerban, A. M. (2018). Enron of Saudi Arabia: Corporate Accounting and Auditing Failures. Open

Journal of Accounting, 07(01), 1–18. https://doi.org/10.4236/ojacct.2018.71001

Corporate Finance Institute. (n.d.). [PDF]. https://corporatefinanceinstitute.com/assets/CFI-Financial-

Ratios-Cheat-Sheet-eBook.pdf

SCO Stock Rating and Data | Cisco Systems Inc - GuruFocus.com. (n.d.). Guru Focus. Retrieved

September 18, 2021, from https://www.gurufocus.com/stock/CSCO/summary

MSI Stock Rating and Data | Motorola Solutions Inc - GuruFocus.com. (n.d.). Guru Focus. Retrieved

September 18, 2021, from https://www.gurufocus.com/stock/MSI/summary

Students2

 In the financial analysis as an investor is very important to measure the liquidity of the firm, in
terms of assessing the financial condition of the firm, there are many approaches for this
assessment of them is the current ratio, below there is a comparison of (NVIDIA Corporation &
Intel Corporation) in terms of liquidity:
 
  NVIDIA Corporation Intel Corporation
Current Ratio 5.8 1.99
 
     As shown above, we could say that Intel has only $1.99 in current assets for every $1 in
current liabilities. (Intel (INTC) financial ratios 2021)
     In the other hand, NVIDIA has $5.8 in current assets for every $1 in current liabilities.
(Nvidia (NVDA) financial ratios 2021)
That shows Intel’s liquidity is lower than that of NVIDIA. This demonstrates the ability of
NVIDIA to pay its bills on time and let the investor have such a sense of relief.
Another measure of profitability that would make the added value in taking your decision
regarding which stocks you may invest with low risk is the return on equity ratio, and is
calculating by dividing net income on total common equity as follows:
  NVIDIA Corporation Intel Corporation

ROE 40.38% 22.19%

 
     Owners of Intel are receiving a lower return equal to 22.19%. (Intel (INTC) financial ratios
2021) compared to NVIDIA’s return on equity which equals 40.38%. (Nvidia (NVDA) financial
ratios 2021)
     One of the justifications for lower ROE is the lower operating return on assets (ROA)
generated by Intel comparing to the ROA of NVIDIA. A lower return on the firm’s assets will
always result in a lower return on equity and vice versa.
     To confirm that investing in NVIDIA’s stock is more reliable and less risky than investing in
Intel’s stocks, we need to calculate further ratio represented in comparing the market value of a
share of stock to the book value per share of the reported equity on the balance sheet to anticipate
the management’s past performance and future prospects, as follows:
  NVIDIA Corporation Intel Corporation
Price/Book ratio 25.85 2.58
 
     As Price to Book NVIDIA is 25.85. (Nvidia (NVDA) financial ratios 2021)
     And the Price to book Intel is 2.58. (Intel (INTC) financial ratios 2021)
     We could conclude that NVIDIA’s shares have more value than what the shareholders
originally paid, Additionally, NVIDIA is perceived as having better possibilities of growth
relative to its risk.
 
 
 
 
References
Intel (INTC) financial ratios.
Investing.com. (2021). Retrieved September 20, 2021, from
https://www.investing.com/equities/intel-corp-ratios.
Nvidia (NVDA) financial ratios. Investing.com. (2021). Retrieved September 2021, from
https://www.investing.com/equities/nvidia-corp-ratios.