Financial Ratio Analysis   Term Paper ID:36332 Click to get this paper

Essay Subject: This paper answers these questions Which ratios do you think would be helpful in ...... More...

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Paper Abstract: This paper adresses the questions: Which ratios do you think would be helpful in assessing the financial strength of NUMMI (New United Motor Manufacture Corporation Manufacture), and why? Paper Introduction: According to an essay by Michael C Dennis published on the Anscerswebsite a ratio is simply a mathematical relationship between two numbers Investors creditors bankers and other stakeholders use financial ratiosto chart a company\'s progress uncover trends and point to potentialproblem areas According to Dennis the following ratios would be helpfulin evaluating NUMMI Liquidity Ratios These ratios indicate the ease of converting currentassets into cash Liquidity involves a company\'s ability to meet currentobligations Liquidity ratios include the Current and Quick An expressionof Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. This ratio indicates what portion of debt interest is covered byNUMMI's cash flow. Liquidity involves a company's ability to meet currentobligations. According to an essay by Michael C. It indicates what return NUMMI isgenerating to stareholders. The Return on Sales formula is: Net profit divided by Sales.This ratio compares after tax profit to sales. Liquidity Ratios: These ratios indicate the ease of converting currentassets into cash. The Return onEquity ratio formula is: Net income divided by stockholder's Acorporation's owners but frequently not the individuals who control andmanage the firm day by day. The Ratios used to measure how efficiently a businessuses and controls its assets. [pic]The current ratio measures financialliquidity. Theformula for calculating the amortization on an intangible asset is similarto the one used for calculating straight-line [pic]divided by InterestExpense. The Assetturnover formula is: Net sales divided by average total assets. According to Dennis, the following ratios would be helpfulin evaluating NUMMI:1. "Financial Ratios." Anscers Encyclopedia. Theformula is: Total liabilities divided by Total equity. The interest Compensation for the use of money. Works CitedDennis, Michael. [pic]divided by (annual netcredit sales divided by 365). One such ratio is the Debt to Equity ratio. This ratio shows how quickly customers arepaying their invoices to NUMMI, which is another measure of managementefficiency.The Return on Assets ratio formula is: Earnings before interest and taxes(EBIT) divided by net operating assets. In general, the higherthis turnover ratio the better NUMMI is performing. This ratioindicates how highly a company is leveraged. It is another measure of financial leverage. CMA Business Credit Services. 2 5 . [pic]equity. This ratioindicates how efficiently a firm utilizes its assets relative to thecompany's sales volume. It can help an analystdetermine if NUMMI is making an adequate return on sales. [pic]inventory turnover ratio formula is:Cost of goods sold divided by average inventory. Leverage ratios measure the relative contribution of stockholders andcreditors. [pic] Ratio The net assets of an individualenterprise, partnershi A partnership is defined as "an association of twoor more persons to carry on as co-owners of a business for profit." Whileno particular form of contract is necessary to create a partnership, apartnership contract usually provides what the partners' ri p, corporation,including not only the original investment, but the gains and profits fromthe business. Cash or other assets that are expected to be converted tocash or sold or utilized within a year or less through the normaloperations of a business. The average collectionperiod formula is: Accounts receivable A claim against a customer forservices rendered or goods sold on credit. [pic]coverage ratioformula is: Earnings before Interest, Taxes, Depreciation and Amortization. The Quick ratio formula is: Cash plus Cash Equivalents plusAccounts receivable divided by current liabilities. It is a more strenuousversion of the current ratio since it offers insights about whether NUMMI'scurrent liabilities could be paid without selling inventory. [pic].The Current Ratio formula is: Current Assets divided by CurrentLiabilities. Efficiency ratios measure how effectively NUMMI's management uses thecompany's assets. This ratio indicates how effectiveNUMMI is at putting its assets to work to generate profits. Profitability ratios measure a company's ability to generate revenuesand profits. An accounting technique by which management gradually recovers the costof expensive fixed assets over the course of their expected lives.[pic]\ Amortization, or amortizing, is providing for the gradualextinguishment of a dollar amount thorough periodic interest payments. 27 Apr. Investors, creditors, bankers and other stakeholders use financial ratiosto chart a company's progress, uncover trends and point to potentialproblem areas. A high debt to equity ratiocould mean NUMMI will have trouble paying its long term debts. A Leverage ratio indicates the extent to which NUMMI relies ondebt rather than equity. Liquidity ratios include the Current and Quick An expressionof a firm's ability to pay its current debts by dividing current assets bycurrent liabilities. Dennis published on the Anscerswebsite, a ratio is simply a mathematical relationship between two numbers. 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