g ratios
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Financial Ratios and Their Calculations for Educational Purposes
Understanding financial ratios is crucial for analyzing the financial health of a company. Below is a list of key financial ratios, their formulas, and their categories or uses:
| **Ratio** | **Formula** | **Category/Use** |
|----------------------------------|-----------------------------------------------------|-----------------------------------------------------|
| **Working Capital** | Current Assets – Current Liabilities | - |
| **Accounts Receivable Turnover** | Net credit sales/Average accounts receivable | - |
| **Asset Turnover** | Net sales/Average total assets | - |
| **Return on Equity (ROE)** | Net income/Average total stockholders’ equity | - |
| **Debt to Equity** | Total liabilities/Total stockholders' equity | - |
| **Return on Sales (ROS)** | Net income/Net sales | Also known as Net Margin |
| **Current Ratio** | Current Assets/Current Liabilities | - |
| **Inventory Turnover** | Cost of goods sold/Average inventory | - |
| **Quick Ratio** | Quick assets/Current liabilities | - |
| **Dividend Yield** | Dividends per share/Market price per share | - |
| **Earnings per Share (EPS)** | Net earnings available for common stock/Number of outstanding common shares | - |
| **Return on Investment (ROI)** | Net income/Average total assets | - |
| **Price Earnings Ratio (P/E)** | Market price per share/Earnings per share | - |
| **Debt to Assets** | Total liabilities/Total assets | - |
**Note:**
- It is important to understand why Return on Investment (ROI) and Return on Equity (ROE) are different as they measure different aspects of financial performance.
This information can serve as a foundational guide for students and professionals looking to assess financial metrics efficiently.
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5. Accounting ratios
(Note: Since you have posted multiple questions, we will solve the first question for you. For the remaining question, please re-post it.)
Accounting ratios are the metrics used to evaluate the financial status of an entity. These represent the financial figures using single numbers or percentages.
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