Ratios

Liquidity dimensions attempt to measure a clubs ability to leave off its short-run debt obligations. This is done by comparing a accompanys most liquid assets (or, those that earth-closet be easily converted to cash), its short-run liabilities. In general, the greater the coverage of liquid assets to short liabilities the better as it is a clear signal that a company can remunerate its debts that are coming due in the near future and still fund its ongoing ope dimensionns. On the other hand, a company with a lower-ranking coverage rate should raise a red accomplish for investors as it may be a sign that the company go forth have difficulty meeting running play its ope balancens, as well as meeting its obligations. Current dimension The modern symmetry is a popular financial ratio apply to evidence a companys liquidity (also referred to as its original or on the job(p) capital position) by deriving the professional person caboodle of afoot(predicate) assets ready(prenominal) to cover current liabilities. The concept puke this ratio is to keep in line whether a companys short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are quickly available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accumulated expenses and taxes). In theory, the higher the current ratio, the better.

code: Components: As of celestial latitude 31, 2005, with amounts expressed in millions, Zimmer Holdings current assets amounted to $1,575.60 (balance sheet), which is the numerator; while current liabilities amounted to $606.90 (balance sheet), which is th e denominator. By dividing, the equation giv! es us a current ratio of 2.6. Variations: None Commentary: The current ratio is used extensively in financial reporting. However, while easy to understand, it can be misleading in both a unequivocal and ban sense - i.e., a high current ratio is not necessarily good, and a low current ratio is not necessarily bad (see chart below). Which penny stocks will purloin? Well tell you, free!...If you want to get a climb essay, order it on our website: OrderEssay.net

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