How to establish financial calculations Analysis
When reading financial statements, it is important to analyze the data in a system so that you interpret the data May .
effectively analyze liquidity ratios l ‘efficiency with which a company is able to meet its debt obligations as they fall due. The different equations used to establish a liquidity include: Current Ratio = Current Assets / Current LiabilitiesAcid test / Quick Ratio = (Current Assets - Inventory) / LiabilitiesCurrent cash flow debt coverage ratio = Net cash from activities / Ave liabilitiesReceivables current turnover = Net sales / Ave trade receivables (net) inventory turnover ratio = Cost of goods sold / Average InventoryNet working capital ratio = current assets - (Liabilities short-term) / Total liabilities AssetsCurrent Inventory Ratio = Current liabilities / InventoryCash Ratio = Cash and cash equivalents /
current liabilities ratios of corporate profitability is generating sufficient profits . The calculations used to determine the profitability of a company include: the rate of profit = net profit to total SalesCash return on sales = net cash from operating activities / turnover ratio = SalesAsset Total Sales / Price Total assets
solvency ratios verify the means by which a company finances its assets. The aim is to follow the debts and assets ratio. The calculation formulas for calculating a company solvency ratios include the debt ratio = Total liabilities / owners EquityDebt to total assets ratio = Total Debt / Total interest income AssetsTimes = Earnings before interest and taxes / ExpenseCash debt = Interest rate hedging net cash from operating activities / Ave. Total liabilities
Return on equity shows how shareholders return on their investment status.The different equations used to determine the return on shareholder investment includes: Return l ‘= (Net Income — (less) Preferred dividends) / Ave-common shareholder equity. Earnings per share ratio = (Net Income-(less) preferred dividends) / Weighted average number of shares Price-earnings = market price of the stock / Earnings per shareCautionBefore engage in a new company, it is also important to study atht all aspects affect a company that includes: market forces at play, factors of financing, interest rates and consumer trends and availability etc
evaluate other factors such as market trends, political and general economic environment before making a decision.
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