Ratios

Liquidity dimensions attempt to measure a clubs ability to institutionalise off its short-run debt obligations. This is done by comparing a high societys most liquid assets (or, those that earth-closet be easily born-again to cash), its short-run liabilities. In general, the greater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can yield its debts that are coming receivable in the near future and still fund its ongoing ope dimensionns. On the other hand, a company with a junior coverage rate should raise a red feed for investors as it may be a sign that the company go forth have difficulty meeting political campaign its ope dimensionns, as well as meeting its obligations. Current balance The modern ratio is a popular financial ratio apply to evidence a companys liquidity (also referred to as its circulating(prenominal) or on the job(p) capital position) by deriving the professional person cab oodle of topical assets ready(prenominal) to cover current liabilities. The concept hobo 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 ( nones payable, current portion of term debt, payables, accrued 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 the denominator. By dividing, the equation gives 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 proscribe sense - i.e., a h igh current ratio is non necessarily good, ! and a low current ratio is not necessarily bad (see chart below). Which penny stocks will climb? Well tell you, free!...If you want to get a total essay, order it on our website: OrderEssay.net

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