A. Debt Management Ratios (Leverage Ratios) The extent to which a firm uses debt financing‚ or financial leverage‚ has three important implications: 1. By raising funds through debt‚ stockholders can maintain control of a firm while limiting their investment 2. Creditors look to the equity‚ or owner-supplied funds‚ to provide a margin of safety‚ so the higher the proportion of the total capital that was provided by stockholders‚ the less the risk faced by creditors 3. If the firm earns more
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In finance Ratio analysis is carried out to judge the liquidity of the organization. It helps the analysts to find if a company is capable enough to pay its liabilities. Moreover it also helps to show the operating efficiency and internal return of an organization. Keep in mind that the ratio is good or bad only if it is compared to the industry in which the organization is operating in. Some of the important ratios are: * Current Ratio * Asset Test Ratio * Return on Asset *
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1. What is the purpose of financial statement analysis? It show trends and relationships. These also help predict the future‚ show weaknesses‚ strengths. The ratios usually are compared to other companies within the industry and industry average to see where the company stands. Source: http://answers.yahoo.com/question/index?qid=20080215185426AACTP6A 2. If a company had sales of $2‚587‚643 in 1998 and sales of $3‚213‚456 in 2003‚ by what percentage did sales change during this time period
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and Firm ’s Profitability: An Optimal Cash Conversion Cycle Haitham Nobanee Department of Banking and Finance‚ The Hashemite University‚ P.O. Box 150459‚ Zarqa‚ 13133‚ Jordan. E-mail: nobanee@gmail.com Abstract The traditional link between the cash conversion cycle and the firm ’s profitability is that shortening the cash conversion cycle increases firm ’s profitability. On the other hand shortening the cash conversion cycle could harm the firm’s operations and reduces profitability. This could
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analyze the financial data of the two companies: Meghna Petroleum Limited (Main Company) and Jamuna Oil Company. (Competitor). In addition‚ to calculate their Liquidity‚ Asset management‚ Debt‚ profitability‚ and market value ratio and compare the two companies by explaining the implications of different ratios. This would enable us to conclude upon whom is in a better position. In addition‚ in this project we will look at the DuPont value‚ which will help us to see whether the company is fully utilizing
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Financial Ratio Formulae http://www.HelpWithAssignment.com Liquidity Ratio 1. Current Ratio = Current Asset / Current Liabilities 2. Quick Ratio = (Current Asset – Inventory)/ Current Liabilities 3. Net working capital to sales ratio = Current Asset - Current Liabilities/ Sales Profitability Ratio 1. Gross Profit Margin = Gross Income / Sales 2. Operating Profit Margin = Operating income/ Sales 3. Net Profit Margin = Net Profit/ Sales Operating Ratio A ratio that
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Ratio Analysis and Statement of Cash Flows Paper Operating Profitability When looking at the operating profitability of Collegiate Funding Service and H&R Block we will be comparing the 2004 and 2005 financial statements. In 2005 H&R Block made total revenue of $4‚420‚019. In 2004‚ H&R Block made total revenue of $4‚247‚880. Looking over the past couple of years it seems that H&R Block ’s revenue continues to increase each year. The majority of the revenue comes from H&R Block ’s tax services
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Critique: Distribution Channel Profitability The article‚ Distribution Channel Profitability was published in a trade journal in January 1995‚ the era of Activity-Based Costing (paradigm C). The author‚ Kenneth H. Manning‚ poses the question “Do companies know which of their distribution channels is most profitable?” The purpose of the article was to evaluate distribution channel systems using ABC concepts to make strategic decisions. The author advocated the need to understand the revenue and
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Executive Summary Caterpillar is a company in the United States that makes engines tractors bulldozers and a lot of other kind of construction and mining equipment and they have many customers in the United States but also across the world. Caterpillar Is the leader in their industry because of their size and innovation of their machines and engines. The research conducted in this paper was to learn about the financial health‚ history and whether or not it would be a good idea to invest into
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Profitability of Environmentally Friendly Companies By: Jayvee Maza BSBA- Financial Management TF (1:00pm-2:30pm) Corporations that have an eco-friendly philosophy are rewarded with greater profits. Outline: I. The Environment and your business II. The benefits of an environmentally friendly business A. Value of Being green B. Make your business environmentally friendly III. Support to help your business go green IV. A. Summary B. Conclusion
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