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Ratios from financial statements can be used to analyze and compare different aspects of a firm, which is often easier for an individual than reading through the financial statements themselves. The ratios determine the how effective and efficient the firm is, while the statements themselves only give the raw data about the firm. The analysis of this data is what allows management and owners to see what areas are doing well and what areas are in need of improvement. Ratios from the financial statements allow an individual to see how liquid a firms assets are, how effectively these assets are being utilized in terms of generating profits, how quickly a firm is able to turn over their inventory, how long it takes them to collect on their receivable accounts, and also it allows them to easily see how their different profit numbers relate to their overall sales.
The limitations of industry average ratios include that it can sometimes be difficult to determine which industry a firm belongs to, that the industry averages are only approximations, an industry average is not necessarily a desirable target ratio, accounting practice differ widely among firms, financial ratios can be too high or too low, and many firms experience seasonal change in their operations (Keown,128). In order to combat these limitations, it helps to know more about the firm and the competition that it is in. Looking at the ratios alone only tells a small portion of the story.
A company has $7.50 per unit in variable cost at $4.70 per unit in fixed cost at a volume of 50,000 units. If the company marks up the cost by 0.52 what price should be charged if 61,000 units are expected to be sold?
Staal Corporation will pay a $2.82 per share dividend next year. The company pledges to increase its dividend by 3 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock ..
Fresh Water, INC. Sold an issue of 23-year $1,000 par value bonds to the public. The bonds have a 9.90% coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, INC bonds 9.17%. What is the current market price o..
Electronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology and has recently entered the..
the attributes of the two widely accepted models used for option pricing: Black-Scholes and Binomial Models. Your paper should be completed in Word and be no less than two pages in length following APA format.
The demand for 1,000 units of a part to be used at a uniform rate throughout the year may be met by manufacturing. The part can be produced at the rate of 3 per hour in a department that works 1,880 hours per year. The set-up cost per lot is estimate..
Which of the following help firms determine the actual implementation of their distribution policy? check all that apply?
A prospectus for a bond issue will normally list both the price to the public and the proceeds to the company. Capital rationing may lead to non-optimal investment decisions.
A municipality is considering an investment in a small renewable energy power plant with the following parameters. The cost is $360,000, and the output averages 50 kW year-round. Calculate the NPV of this investment. Is it financially attractive?
The R.M Smithers Corporation earned an operating profit margin of 11.2 percent based on sales of 10.5 million and total assets of 4.8 million last year. What was Smithers' operating return last year? Assuming the firm's operating profit margin remain..
It is frequently stated that the one purpose of the pre-emptive right is to allow individuals to maintain their proportionate share of the ownership and control of a corporation. How important do you suppose control is for the average stockholder of ..
McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $832,500, and $1,215,000 over the next three years. What is the payback period ..
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