Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders.. Liquidity Ratios: Current assets are a business's total current assets divided by its total current liabilities. Total Current Asset / Total Current liabilities 1,971,000 / 116,290 16.949 = 16.9 Current Ratio- 16.9:1 or 17:1 (16.9 to 1 or 17 to
The profit percentage of assets varies by industry, but in general, the higher the ROA the better. We can see a good trend over years in the company. Comments: Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders' equity. The formula for ROE is: ROE is more than a measure of profit; it's a measure of efficiency. A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital.
Growth maximisation is where the firm’s main goal is to increase the size of the firm as much as possible. Some firms may have the objective to maximise revenue, this basically is when a firms aim is to achieve as high total revenue as possible and occurs when marginal revenue to equal to zero. Another objective of s firm may be a profit satisfaction, this is where a firm produces a profit which is deemed to be a reasonable level, which is satisfying to stake holders and is not maximising profit. The best example in a leisure market is a firm that has been recently set up and wants to survive so the first couple of years their target will be to make a profit and survive. If they try to maximise profit it would an unrealistic competition as
The higher the ratio the more assurance exists that the retirement of current liabilities can be made. The current ratio measures the margin of safety available to cover any possible shrinkage in the value of current assets. Normally a ratio of 2 to 1 (2.0) or better is considered good. Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business.
Without proper cash management and regardless of how fast a firm’s sales or reported profits on the income statement are growing, a firm cannot survive without carefully ensuring that it takes in more cash than it sends out the door. When analyzing a company's cash flow statement, it is important to consider each of the various sections that contribute to the overall change in cash position. In many cases, a firm may have negative overall cash flow for a given quarter, but if the company can generate positive cash flow from its business operations, the negative overall cash flow is not necessarily a bad
These ratios will be calculated from the income statement, balance sheet and statement of cash flows Liquidity Liquidity Ratios measure a company’s ability to meet its short-term debt obligations without disrupting normal operation. The higher the ratio the better a company will be at meeting its short-term obligations as well as have extra cash to cover any unforeseen cash requirements. The liquidity measures we will use are the current ratio, current cash debt ratio, inventory turnover, average days in inventory, receivable turnover ratio and average collection period. The current ratio measures the company’s ability to pay its short-term liabilities (payables and debt) with short-term assets (cash, receivables and inventory). Tootsie Roll exceeds its ability to meet short-term debt obligations with $3.45 in current assets for every $1 in current liabilities.
(p. 191) ______________ theory is typically associated with greater profits. a. Signaling b. Compensating wage differentials C. Efficiency wage d. Human capital 4. (p. 193) Implications of _______________ theory are that pay level affects an employer's ability to recruit.
Discuss the extent to which firms in the leisure industry always seek to maximise profits. Profit maximisation is achieving the highest possible profit where marginal costs are equal to marginal revenue. This is what some firms in the leisure industry will seek to do, such as cinemas, as the business' main objective is to create high levels of profit. Profit maximisation can be seen on the graph at point MC=MR (the two curves cross). This is the point where profits are maximised.
This shows Targets improvement over time to pay its current liabilities based on available cash, short term investments, and receivables. Some items that may have impacted the quick ratio were a major increase in cash & equivalents as well as a generous increase in receivables from 2007 to 2008. Target’s quick ratio was higher than Wal-Mart’s quick ratio. This is an important comparison as Target’s ratio was higher than Wal-Mart’s regardless of the fact that Wal-Mart is a larger company that has traditionally outperformed
It will show where it comes from, and where it goes. This indicates the company’s profitability, as shown in the net income, and their ability to meet obligated debts. It is possible for a company to have success in sales and net earnings and still fail to generate enough cash flow to meet obligations. The Home Depot is reporting a well maintained cash balance as reported in the balance sheet, and its operations continue to keep the influx of cash coming. The Home Depot cash flow shows significant net earnings and the cash flow statement does not indicate a drastic drop from previous years.