The article I chose is Solvency Ratio Analysis and Leveraging. This article tells about how solvency and leveraging are connected. It describes several ratios used to determine how a company is doing long-term. Company’s use debt and equity to start and keep their operations running. Owners or stockholders donate equity to build and maintain their company. Leverage is used to produce income and impacts a company’s long-term solvency. No matter what the economic situation is, a company needs to be able to make their interest and principal payments. If a company is highly leveraged, they can go out of business. Debt Ratio is the most used. The equation is: Total Liabilities/ Total Assets = Debt Ratio. The numbers to figure out the Debt Ratio can be obtained from the balance sheet. This ratio indicates how much the company’s assets are funded through debt. Debt to Equity Ratio is used to find out the company’s solvency and leverage. The equation is: Total Liabilities/ Total Equity = Debt to Equity Ratio. These numbers can be obtained from the balance sheet. A higher amount indicates the company is obtaining most of their funding through creditors. A lower amount indicates a company is able to obtain outside funding. Times Interest Earned Ratio measures if a company can pay their interest payments. The equation is: Income Before Interest and Taxes/ Interest Expense = Times Interest Earned Ratio. These numbers can be gotten from the income statement. This ratio measures how many times operating income can cover interest expense. A high number indicates the ability to pay interest and a low number indicates problems in the future. I found this article to be informative. It gave good information on solvency, leverage, and ratios used to determine how a business is doing in the long-run. http://www.brighthub.com/office/finance/articles/85143.aspx

...Ratio, Vertical, and Horizontal Analyses
Regina Stewart
XACC/280
February 3, 2012
Jose Rodriguez
Ratio, Vertical, and Horizontal Analyses
A detailed examination of the tools used in financial analysis, in addition to their various functions, is provided within this paper. The current ratio and calculations on the questions are provided herein.
A variety of tools are used to assess the importance of financial data. Frequently used tools of financial statement analysis consist of horizontal analysis, vertical analysis and ratio analysis. These techniques assist in the evaluation of financial statements providing information regarding the financial condition of a business.
Evaluating the data of financial statements over a period of time, is considered horizontal analysis and is primarily used in intracompany comparisons with the purpose of determining an increase or decrease over a period of time.
Vertical analysis expresses individual items in the financial statement in the percentage format of the base amount and is used in comparisons of both intracompany and intercompany. Vertical analysis reflects the comparative size of each category in the balance sheet along with the percentage change in the individual asset, liability, and stockholders’ equity items.
Ratio analysis articulates the relationship between selected items of financial statement data and is used in all three...

...Low Debt Ratio: How Does it Contribute to Company Performance?
Introduction
It has been said that you must measure what you expect to manage and accomplish. The same is true when one considers business performance. In a business measurement drives improvement which drives satisfaction. In turn, satisfaction results in loyalty from customers which means the financial success of a business. Without measurement, one has no reference to work with and thus, tends to operate in the dark.
One way of establishing references and managing the financial affairs of an organization is to use ratios. Ratios are simply relationships between two financial balances or financial calculations. These relationships establish our references so we can understand how well we are performing financially. Ratios also extend our traditional way of measuring financial performance; i.e. relying on financial statements. By applying ratios to a set of financial statements, we can better understand financial performance.
Statement of the Problem
The debt ratio compares a company's total debt (the sum of current liabilities and long-term liabilities) to its total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill'), which is used to gain a general idea as to the amount of leverage being used by a company. It compares the funds provided by creditors to the funds provided by...

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Ratio Analysis University of Phoenix
HCS/571 Finance Resource Management Sept 24, 2013Rosetta Stringfellow, MBA, BSRatio Analysis Ratio analysis is a widely used managerial tool that compares one number with another to gain insights that would not arise from looking at either of the numbers separately. Ratio analysis is used to examine and interpret the relationship between two numbers on a financial statement. This is done so that the managers of a facility can determine whether or not the organization needs to change any of their financial variables in order to remain competitive in their market. The ratio analysis converts numbers into meaningful comparisons which managers can use to compare their facilities with others within the same market. The management team can also use the ratio analysis to see how the facility is performing from year to year. In sum, ratio analysis shows the strengths and weaknesses of a health care facility (Finkler, Kovner, & Jones, 2007).
The financial data for this paper are from the financial statements of Norwalk Hospital located in Fairfield County, Connecticut. Common size ratios allow comparisons between comparable health care organizations. It is important to see how the facility compares to others in the region of the market place (Finkler et al., 2007)....

...[ 7/16/2012 ]
Re: Ratio Analysis Memo
CEO of Baderman Island Resort,
In the evaluation of liquidity ratios, the revenue from the income statement finds the Tenney at Night to be the most profitable and the Kayfe as the least profitable. The balance sheet states the Morgan Bistro has the best debt to asset ratio of 12.18% and the Kayfe with the highest debt to ratio of 26.49%. The balance sheet also states the Kayfe has the lowest times interest earned ratio of 5.91 and the Morgan Bistro with the highest times interest earned ratio of 14.33. The current ratio is 1.00 and the quick ratio is 0.11. Total asset turnover is 6.21.
In the evaluation of profitability ratios for 2004 the total assets were 137,598, return on assets of 1.86, and retained earnings of 72,343. For 2005 the retained earnings is 328,524 with average equity of 200,433. The return on equity is 1.28. The net income after taxes was 256,181.
In evaluating the solvencyratios
In the evaluation of the horizontal analysis the total current assets shows a decrease in 2005 of about $60,000 but increases by $44,000 in 2006, a difference of $16,000 from 2004.
Investors and creditors will show interest in the probability ratios. Investors and creditors will want to know if Baderman Island Resort is profitable. Investors want a return on their...

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Assignment 2012/2013 – Semester 2
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B. Com (Major in Banking and Finance) – Year III
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Ratio Analysis Report
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Student: Kevin Galea 205891 (M)
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Lecturer: Dr. Emanuel Camilleri
Introduction
The purpose of the following report is to aid Build-It Ltd in planning the direction that the company may want to go over the next few years. The report entails a financial analysis which will give the directors an understanding of how well the company is performing.
Figures were obtained from comparative balance sheets and profit and loss statements from the last two years. This information enabled the development of percentage and ratio analysis (see appendices), which was then used to create the report.
Profitability Ratios Analysis
Profitability refers to the ability to make profit from the company’s business activities. It shows how efficiently the management can make profit by using all the resources available.
A very important ratio is the Return on Capital Employed (ROCE). This shows the profit made in relation to the resources employed. Build-It Ltd’s ROCE ratios for 2011 and 2012 were calculated as 22.12% and 25.64% respectively. This increase in...

...Subject:
Ratio Analysis of Volume Book Distributors Ltd for the Years 2010 And 2011
A. INTRODUCTION
The report is based on the company Volume Book Distributors Ltd. Ratio analysis was calculated for Volume Book Distributors Ltd for both the years 2010 and 2011. The ratios comprised of profitability, asset utilization and financial stability ratios. The first question consists of Part A, which has the Ratio Calculations, and Part B which has the Analysis and Interpretation.
B. LIMITATIONS
We faced few limitations while preparing the financial ratio analysis. The limitations are given below,
* Economic factors like inflation, unemployment rate, etc were not taken into consideration when calculating the ratios.
* All the information needed to prepare the financial ratio analysis was not available. We only had only two years worth of financial data to calculate and interpret.
* Only few of the industry averages for the ratios and percentages were given.
* Some industry averages were given but similar companies in same industry follow different accounting policies. While calculating and interpreting the ratios and percentages, this information was not taken into consideration.
C. RATIO ANALYSIS
Financial ratio analysis is the calculation and comparison of...

...Ratio analysis provides an indication of a company's liquidity, gearing and solvency. But ratios do not provide answers; they are merely a guide for management and others to the areas of a company's weaknesses and strengths (Palat 1999).
However, ratio analysis is difficult and there are many limitations. This section will identify and discuss the inadequacies of accounting ratios as tools of financial analysis.
ACCOUNTING POLICIES.
It is difficult to use ratios to compare companies, because they very often follow different accounting policies. For example, one company may value stock under the LIFO principle, another may follow the FIFO principle. Similarly, one company may depreciate assets under the straight line method, while its competitors may be using reducing balance method. Also, one company may value their assets using the historical cost rule while another may use the alternative accounting rule. Other areas in which policies may differ between companies include development cost deferral policy, capitalisation of interest costs, etc.
SKILL OF ANALYST
In other to state whether a ratio is good or bad it must be intelligently interpreted. For example, a high current ratio may indicate, on the one hand, a liquidity position (which is positive) and, on the other excessive liquid cash (which is negative).
RETURN ON EQUITY
A direct comparison between...

...tools that a company can use to evaluate how well it is performing, one of those tools is the debt ratio calculation. The debt ratio shows the proportion of assets financed with debt, liabilities. It is calculated by the companies total liabilities divided by its total assets and is used as a percentage. Total assets and total debts can be found on the balance sheet. “It can be used to evaluate a business’s ability to pay its debt” (Nobles p. 89).
The debtratio can be used to evaluate a business’s ability to pay it’s debts. An investor will want to know what percentage a business is at because it helps determine a company's risk level. The higher the debt ratio, the higher the risk. “Companies that have a high percentage of liabilities are at greater risk of default. If they are unable to pay their creditors as the amounts become due, the creditors have the right to claim the assets” (Nobles p. 90). As the ratio number moves closer to 1, more of a company’s assets are then being financed by debt therefore more likely moving closer to bankruptcy. The debt ratio is not just a good or bad number, “high” and “low” ratios vary by industry. “Debt ratios vary widely across industries, with capital-intensive businesses such as utilities and pipelines having much higher debt ratios than other industries like technology” (“DEFINITION of 'Debt...