레이블이 Debt to Total Assets Formula인 게시물을 표시합니다. 모든 게시물 표시
레이블이 Debt to Total Assets Formula인 게시물을 표시합니다. 모든 게시물 표시

2013년 12월 3일 화요일

About 'debt to assets formula'|How to Reach $1 Million







About 'debt to assets formula'|How to Reach $1 Million








When               you               are               starting               a               home               search,               the               first               subject               you               must               become               familiar               with               is               how               to               finance               your               purchase.

Some               people               go               straight               to               their               local               bank               when               seeking               a               home               loan,               some               go               to               a               mortgage               broker               who               will               be               able               to               give               them               many               different               options               as               far               as               the               type               of               loan               they               qualify               for               (at               a               fee               of               course).

In               this               author's               opinion,               the               best               way               to               go               is               with               a               lender               or               broker               who               was               referred               to               you               by               someone               you               trust.

When               you               decide               on               someone,               the               next               step               is               to               find               out               if               you               really               qualify.

Credit               Score,               Income,               and               Debt
               The               first               question               a               mortgage               lender               will               want               to               know               is               "what               is               your               credit               score?"               (Tip:               Most               first               time               home               buyers               don't               realize               that               they               do               not               have               to               give               every               possible               lender               their               social               security               number               to               get               an               estimate               of               their               rates.

If               you               know               your               credit               score,               you               can               just               tell               them               what               it               is               and               let               them               give               you               the               rates               they               have,               then               you               can               come               back               and               give               them               your               social               to               process               the               loan.)               One               of               the               biggest               factors               in               financing               a               mortgage               transaction               is               your               credit               score.

Most               lenders               will               not               even               look               further               into               an               application               with               a               credit               score               lower               than               580,               while               others               will               try               to               take               advantage               of               bad               credit               customers               with               high               priced               products.

Generally,               customers               with               credit               scores               over               700               will               have               an               easier               time               getting               a               fair               mortgage               loan.

If               your               credit               score               is               less               than               desirable,               you               may               want               to               reconsider               your               decision               to               purchase               a               home               at               this               time.
               Other               factors               lenders               use               to               determine               whether               you               are               qualified               for               a               loan               are               your               income               and               debt               load.
               How               Much               Home               Can               I               Afford?
               So               one               of               your               first               questions               to               tackle               is               "how               much               home               can               I               afford?"               The               general               rule               is               that               your               total               monthly               home               costs               should               be               no               more               than               28%               of               your               gross               monthly               income.

Monthly               home               costs               include               mortgage               payment,               taxes,               insurance               and               any               home               repairs               and               upkeep.

(Tip:               You               can               find               many               mortgage               payment               calculators               by               doing               a               simple               Internet               search.

Run               some               sample               home               prices               through               a               mortgage               calculator               to               figure               out               what               your               monthly               mortgage               would               be               at               a               common               interest               rate               (around               7%)               to               decide               how               much               home               you               really               can               afford.)               You               also               need               to               find               local               information               about               your               tax               and               insurance               rates.
               Another               important               formula               that               most               lenders               will               consider               is               your               debt-to-income               ratio.

You               generally               do               not               want               your               total               monthly               debt               to               exceed               36%               of               your               gross               monthly               income,               or               you               may               be               in               a               trouble               zone               as               far               as               trying               to               get               your               home               purchase               financed               at               a               reasonable               rate.
               Down               Payment
               In               the               previous               market,               down               payments               were               not               always               necessary.

Mortgage               brokers               had               many               products               that               provided               100%               financed               loans               to               cover               the               entire               loan.

Nowadays,               these               types               of               loans               are               a               thing               of               the               past.

You               need               a               down               payment               of               at               least               10%               of               the               purchase               price               of               the               home               to               receive               financing,               along               with               the               closing               costs               which               can               be               as               high               as               $5,000.

(Tip:               Most               sellers               will               provide               what               is               called               a               "seller's               assist,"               which               is               a               percentage               of               the               home               purchase               price,               usually               about               3%               that               will               be               put               forth               to               help               the               buyer               pay               his               or               her               closing               costs.

This               "seller's               assistance"               is               applied               at               the               closing               table.)
               What               Kind               of               Mortgage               Product               is               Best               for               My               Situation?
               Once               it               is               determined               that               your               credit               score,               income,               home               price,               and               debt               load               is               appropriate               for               your               situation,               you               then               have               to               make               the               decision               with               your               lender               on               what               kind               of               mortgage               you               will               take               --               a               fixed               loan,               adjustable               rate               mortgage               (ARM),               The               30               year               fixed               loan               is               the               most               common               and               preferred--basically               you               will               make               a               fixed               payment               every               month               for               the               next               360               months               at               a               set               rate.

Some               people               vie               for               a               10,               15,               or               20               year               fixed               loan               at               a               higher               monthly               payment,               the               benefit               being               that               you               will               be               finished               paying               for               your               house               in               much               less               time               compared               to               a               30               year               fixed,               and               save               thousands               in               interest.

(Tip:               Most               people               also               make               biweekly--instead               of               monthly--payments               on               their               30               year               fixed               mortgages               which               allows               them               to               pay               off               their               loan               quicker               and               with               much               less               interest               cost.)
               The               verdict               is               still               out               on               adjustable               rate               mortgages.

Some               say               it               is               a               useful               tool               for               prospective               home               owners               who               are               looking               to               save               some               money,               and               some               say               it               is               a               death               trap               for               inexperienced               home               owners               who               know               nothing               about               the               way               the               economy               moves.

With               adjustable               rate               mortgages               you               will               pay               a               fixed               rate               over               a               certain               number               of               years--namely               three               or               five               years--and               then               your               rate               will               begin               adjusting               based               on               a               formula               set               by               the               lender.

In               some               cases               after               the               three               or               five               years               is               up,               the               rates               and               resulting               payment               can               almost               double               (depending               on               the               lender               terms).

Most               lenders               will               recommend               an               adjustable               rate               only               to               people               who               only               plan               to               live               in               their               house               for               three               years               or               less               and               want               a               low               monthly               payment.

That               way               when               they               move               and               sell               their               house,               they               will               have               never               been               affected               by               an               increasing               rate.

They               also               have               the               opportunity               to               refinance               after               the               ARM's               fixed               time               period               is               up,               but               refinancing               can               be               difficult,               impossible,               and/or               expensive               for               a               homeowner               in               this               situation.

The               proliferation               of               ARM's               in               the               current               American               real               estate               market               has               played               an               important               role               in               the               increase               in               home               foreclosures.
               One               type               of               mortgage               that               most               financial               professionals               agree               you               should               avoid               is               any               loan               that               includes               a               balloon               payment.

With               this               type               of               loan,               you               will               pay               a               lower               monthly               payment               over               time,               but               then               end               up               having               to               pay               a               large               payment               at               the               end               of               your               loan               that               you               most               likely               will               not               be               able               to               afford.

Also,               unless               you               are               a               real               estate               investor,               you               should               avoid               interest               only               loans.

With               an               interest               only               loan               you               will               pay               a               lower               monthly               payment               over               a               certain               number               of               years,               but               all               of               the               money               paid               will               go               straight               to               the               lender's               pocket--none               will               go               toward               paying               off               the               principal,               which               is               the               actual               bill               for               your               house.

The               more               principal               you               pay,               the               more               equity               you               gain               in               your               house.

The               interest               only               loan               is               only               ideal               for               real               estate               investors               because               they               usually               don't               plan               on               holding               onto               the               house               for               very               long.
               Stated               income               and               stated               assets               loans               are               available               to               people               who               are               self-employed               and               have               good               credit.

With               these               products               you               do               not               have               to               prove               or               verify               income               or               assets,               and               the               lender               is               only               considering               your               payment               and               credit               history.

The               negative               side               of               a               stated               income               or               asset               loan               is               a               slightly               higher               interest               rate               which               could               cost               you               thousands               over               time.
               Do               Your               Research
               Use               the               Internet               for               all               it's               worth.

Search,               research,               and               search               again               to               gather               as               much               information               as               possible               before               making               a               final               decision               on               your               real               estate               financing.

Information               is               power,               and               ignorance               is               costly.

With               the               proper               research,               questions,               and               parties               involved               in               your               transaction,               financing               your               home               can               be               a               breeze.






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    2013년 11월 28일 목요일

    About 'total debts to assets ratio'|Finance :: Leverage Ratio :: Debt-to-Equity Ratio







    About 'total debts to assets ratio'|Finance :: Leverage Ratio :: Debt-to-Equity Ratio








    House               of               Representatives               did               not               pass               the               Emergency               Economic               Stabilization               Act               bill               today.

    Speaker               Nancy               Pelosi's               untimely               attack               on               Bush,               with               whom               she               cooperated               in               finalizing               the               draft               during               the               weekend,               made               many               Republicans               grow               cold               feet.

    So               today,               when               the               bill               was               put               vote,               it               failed               to               muster               the               required               majority               of               218.

    While               228               voted               for               it,               205               voted               against               it.

    For               the               market,               it               was               almost               a               foregone               conclusion               that               it               would               be               passed,               based               on               the               bipartisan               camaraderie               shown               in               the               weekend.
                   And               when               the               market's               expectations               were               belied,               it               reacted               violently.

    The               Nasdaq               and               S&P               500's               fell               by               the               largest               points               since               the               1987               Black               Monday.

    Dow               Jones               Industrial               Average's               (DJIA)               slide               was               surpassed               only               by               the               fall               in               the               wake               of               the               9/11               attacks.
                   Global               markets               too               reacted               by               sliding               4-5%               be               it               European               or               Asian               markets.
                   Even               the               fact               that               the               Fed               and               nine               other               central               banks               pumped               in               $620               bln               overnight               to               assure               liquidity               in               the               banking               system,               was               not               noticed.
                   In               UK,the               mortgage               lender               Bradford               &               Bingley               was               nationalized.

    Their               deposit               taking               branches               are               to               be               acquired               by               Spain's               Bank               Santander               (STD).

    Belgium,               Netherlands               and               Luxembourg               took               a               combined               $16               bln-stake               of               49%               in               Fortis               bank               in               a               similar               bail-out               move.

    Iceland's               Glitnir               and               Germany's               Hypo               also               had               money               infusions               from               their               respective               governments.
                   With               European               currencies               falling,               US               dollar               was               the               obvious               beneficiary.
                   Economic               Data:
                   Personal               consumption               expenditures               (PCE)               for               the               month               of               August               -               Total               spending               was               unchanged               though               analyst               forecast               was               for               an               increase               of               2%.


                   Personal               income               saw               a               meager               increase               of               0.5%               but               it               was               still               higher               than               the               consensus               forecast               of               .
                   September               Farm               Prices               Index               -               fell               by               -1.3%               from               August.

    The               Crop               Index               fell               by               -1.7%               and               the               Livestock               Index               by               -2.2%.
                   Emergency               Economic               Stabilization               Act               Bill:
                   Yes,               that               is               the               name               of               the               Bush's               financial               recovery               plan.

    Some               of               the               clauses               in               the               bill               include:               
                   stricter               regulatory               oversight,               limiting               executive               compensation,               relief               from               foreclosure,               purchasing               illiquid               assets               using               the               $700               to               be               allocated               in               three               tranches               of               $250,               $100               and               $350               under               supervision.
                   One               important               clause               allows               Fed               to               reward               higher               reserve               holding               banks               by               paying               interest               on               that               amount.
                   CBOE               Volatility               Index               (VIX)               soared               through               nearly               12               points               to               46.72.
                   Oil               fell               by               $-10.52               (-9.84%)               to               $96.37.
                   Gold               being               the               safe               haven               alternative               in               times               like               this,               went               up               by               $5.90               (0.66%)               to               $894.40.
                   Government's               Treasury               bonds               too               are               hot               favorites               now.
                   Market               indices:
                   Dow               went               DOWN               by               -777.68               (-7.50%)               to               10365.45               
                   SP               500               DOWN               by               -106.59               (-9.63%)               to               1106.42               
                   Nasdaq               DOWN               by               199.61               (-10.06%)               to               1983.73
                   NYSE               :
                   Daily               volume:               1.86               bln               
                   A/D               Ratio:               163               stocks               advanced               against               3109               declined               
                   52-weeks               Hi/Lo:               Only               14               stocks               attained               new               Highs               while               970               stocks               made               it               down               to               new               Lows
                   Nasdaq:
                   Daily               volume:               2.82               bln               
                   A/D               Ratio:               414               stocks               advanced               against               2572               declined               
                   52-week               Hi/Lo:               21               stocks               topped               new               Highs               while               705               stocks               set               new               Lows
                   Market's               fall               today               spread               though               all               of               its               sectors.
                   Bain               Capital               and               Hellman               &               Friedman               are               acquiring               Lehman               Brother's               troubled               Neuberger               Berman               division               for               $2.15               bln.
                   Japan's               Mitsubishi               UFJ               (MTU)               is               to               acquire               a               20%               stake               in               Morgan               Stanley               (MS)               for               $9               bln.
                   Details               of               Citibank's               acquisition               of               Wachovia               business:               
                   Citigroup's               total               outlay               in               acquiring               Wachovia               is               around               $2.2               bln.

    That               covers               $700               bln               operational               assets               and               liabilities               and               $53               bln               senior               and               subordinated               debts.

    The               FDIC               will               absorb               any               losses               beyond               $42               bln               that               arises               out               of               the               mortgage               portfolio               worth               $312               bln               which               Citi               assumed.

    Citi               is               allowed               to               issue               $10               bln               common               stock               to               public.
                   Company               Results:
                   Walgreen               (WAG)               produced               quarterly               earnings               that               conformed               to               the               analyst's               expectations.

    Circuit               City's               (CC)               earnings               were               disappointing.
                   Analyst's               Ratings:
                   Upgraded               stocks               are:
                   BorgWarner               Inc(BWA),               Brookfield               Infrastructure               Partners               (BIP),               
                   Canadian               Imperial               Bank               of               Commerce               (CM),               National               City               Corp               (NCC),               Nortel               Networks               Corp               (NT),               PMFG               Inc               (PMFG),               Sovereign               Bancorp               (SOV),               Take-Two               Interactive               Software               (TTWO),               Ticketmaster               (TKTM)               and               Tellabs               Inc               (TLAB).
                   Downgraded               stocks               include:
                   Apple               (AAPL),               Brookline               Bancorp               (BRKL),               Citrix               Systems               (CTXS),               Comcast               Corp               (CMCSA),               Coeur               d'Alene               Mines               (CDE),               Concur               Technologies               (CNQR),               DISH               Network               (DISH),               Freeport-McMoRan               Copper               &               Gold               (FCX),               Motorola               Inc               (MOT),               Research               In               Motion               Ltd               (RIMM),               Sadia               SA               (SDA),               Sprint               Nextel               Corp               (S),               Strategic               Hotels               &               Resorts               (BEE),               Thor               Industries               (THO),               Vasco               Data               Security               International               (VDSI)               and               Winnebago               Industries               (WGO).
                   Credit               is               hard               to               come               by               for               even               banking               institutions.

    So               they               are               charging               each               other               more               than               4%               for               just               an               "overnite"               loan.
                   Where               did               all               this               trouble               start?
                   For               a               change,               the               answer               comes               from               Canadian               prime               minister               Harper               (comments               after               the               hyphens               are               mine)               :
                   1.

    poor               oversight               -               self-governed               doesn't               mean               not               governed.


                   2.

    cheap               credit               -               lying               about               the               applicant's               income               and               capacity               to               return               the               loan               
                   3.

    tax               sops               that               give               rise               to               housing               bubbles               -               encouraging               people               to               leverage               too               much               
                   4.

    Ignoring               early               warning               signs               -               yeah,               anybody               who               had               the               nerve               to               warn               was               intimidated               by               accusations               of               conspiracy               theory               or               doomsday               prophesy
                   Before               calling               our               northern               neighbor               a               traitor               or               backstabber,               remember               he               is               just               telling               the               truth.
                   Yes,               truth               can               be               unsavory               and               uncomfortable.






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    2013년 11월 24일 일요일

    About 'debt to total assets ratio interpretation'|Debt Rattle, December 20 2008: War in the Labour Markets







    About 'debt to total assets ratio interpretation'|Debt Rattle, December 20 2008: War in the Labour Markets








    Financial               ratios               are               the               comparative               values               which               are               used               to               scrutinize               and               keep               an               eye               on               a               company's               performance.

    An               analysis               of               financial               statements               is               based               on               these               ratios               in               a               ratio               analysis.

    A               company               obtains               the               basic               data               for               its               ratio               analyses               from               its               own               income               statement               and               balance               sheet.

    A               ratio               analysis               is               the               interpretation               of               the               ratio               value               -               what               it               means.

    There               are               two               types               of               ratio               comparisons               that               can               be               made:               cross-sectional               and               time-series.

    (Gitman,               2009,               p.

    54)               Cross-sectional               analysis               is               the               comparing               of               one               company's               financial               ratio(s)               to               another               company's               financial               ratio(s)               when               both               companies               are               in               the               same               industry.

    These               analysis               entail               a               comparison               at               the               same               point               in               time.

    For               example,               Microsoft               may               want               to               compare               its               total               liabilities               to               net               worth               ration               to               that               of               Apple.

    Chevron               may               want               to               compare               its               return               on               total               assets               ratio               to               that               of               Exxon.

    Cross-sectional               analysis               can               also               include               the               comparing               of               a               company's               financial               ratio               to               the               industry               average               financial               ratios.

    When               there               is               a               noteworthy               deviation               to               the               positive               or               negative               side               of               the               industry               average,               then               this               needs               to               be               investigated.

    Even               a               high               deviation               to               the               positive               side               can               spell               trouble.

    (p.

    54)
                   Time-series               analysis               examines               a               company's               financial               performance               over               time.

    By               comparing               the               present               to               past               performance,               via               ratios,               analysts               can               assess               a               company's               development.

    Positive               and               negative               trends               can               be               exposed               by               using               multiyear               comparisons.

    A               large               problem               may               be               revealed               through               any               striking               year-to-year               changes.

    (p.

    56)
                   As               with               most               methods               of               various               types               of               methods               used               in               the               world               today,               there               is               also               a               hybrid               method               of               cross-sectional               analysis               and               time-series               analysis,               simply               referred               to               as               combined               analysis.

    Combined               analysis               is               considered               the               most               functional               way               to               use               ratio               analysis.

    Utilizing               this               combined               view,               analysts               are               able               to               evaluate               any               trends               in               the               behavior               of               the               ratios               in               relation               to               trends               in               the               industry.

    (p.

    56)
                   Financial               ratios               can               be               divided               into               five               categories:               liquidity,               activity,               debt,               profitability,               and               market               ratios.

    To               gauge               risk,               analysts               use               liquidity,               activity,               and               debt               ratios.

    To               calculate               return,               analysts               choose               profitability               ratios.

    To               quantify               both               risk               and               return,               analysts               opt               for               market               ratios.
                   There               are               two               types               of               liquidity               ratios:               current               ratio               and               quick               (acid-test)               ratio.

    The               current               ratio               is               one               of               the               most               commonly               referenced               financial               ratios               as               it               gauges               a               company's               capability               to               meet               its               short-term               commitments.

    It               is               derived               by               dividing               the               present               assets               of               the               firm               by               the               firm's               present               liabilities.

    Most               often,               the               higher               the               current               ratio,               the               more               liquid               the               firm               is               thought               to               be.

    A               current               ratio               of               2.0               is               infrequently               named               satisfactory.

    However,               a               value's               suitability               is               dependent               upon               the               industry               in               which               the               company               operates.

    The               quick               (acid-test)               ratio               is               analogous               to               the               current               ratio               except               that               it               does               not               include               inventory,               which               is               most               often               the               least               liquid               current               asset.

    The               quick               ratio               is               calculated               by               subtracting               the               firm's               inventory               from               its               current               assets               and               then               dividing               that               resulting               number               by               the               firm's               current               liabilities.

    A               quick               ratio               of               1.0               or               higher               is               intermittently               recommended,               but,               just               like               the               current               ratio,               what               value               is               considered               adequate               is               for               the               most               part               dependent               on               the               industry.

    The               quick               ratio               is               a               better               gauge               of               by               and               large               liquidity               only               when               a               company's               inventory               cannot               be               simply               transformed               into               cash.

    If               inventory               is               liquid,               then               the               current               ratio               is               the               favored               measurement               of               on               the               whole               liquidity.

    (p.

    58-59)
                   There               are               four               types               of               activity               ratios               -               inventory               turnover,               average               collection               period,               average               payment               period,               and               total               asset               turnover               -               which               measure               the               quickness               with               which               different               accounts               are               transformed               into               sales               or               cash.

    Inventory               turnover               typically               measures               the               movements,               or               liquidity,               of               a               company's               inventory               by               dividing               the               cost               of               goods               sold               by               the               inventory.

    The               turnover               amount               that               is               the               result               is               only               important               when               it               is               contrasted               with               that               of               other               companies               in               the               same               industry               or               to               the               company's               past               inventory               turnover.

    The               average               collection               period,               or               average               age               of               accounts               receivable,               is               valuable               in               evaluating               credit               and               collection               policies.

    To               obtain               this               value,               the               accounts               receivable               is               divided               by               the               average               sales               per               day               (annual               sales               divided               by               365).

    The               resulting               number               will               signify               how               many               days               it               takes               to               collect               an               account               receivable,               on               average.

    If               a               company               has               30-day               credit               terms               with               its               clients               and               they               have               an               average               collection               period               value               of               55,               then               that               may               be               an               sign               of               an               inadequately               managed               credit               or               collection               division.

    If               the               company               finds               that               a               60-day               credit               term               would               be               worthwhile,               then               the               55               days               would               then               become               satisfactory.

    The               average               payment               period,               or               average               age               of               accounts               payable,               is               calculated               just               like               the               average               collection               period,               except               you               are               dividing               accounts               payable               by               the               average               purchases               per               day               (annual               purchases               divided               by               365).

    This               is               a               tricky               value               to               determine               because               a               company's               annual               purchases               is               not               presented               in               financial               statements.

    Therefore,               purchases               are               typically               an               approximation               as               a               given               percentage               of               cost               of               goods               sold.

    This               value               is               significant               only               in               relation               to               the               average               credit               terms               given               to               a               company.

    When               a               company               is               applying               for               credit,               creditors               will               be               most               interested               in               this               value               because               it               provides               a               good               look               into               how               a               company               pays               its               bills.

    If               the               average               payment               period               is               10               days               and               the               company               has               30-day               terms               across               the               board,               then               their               credit               rating               will               be               much               higher               than               if               the               value               was               50.

    The               total               asset               turnover               shows               the               efficiency               with               which               a               company               uses               its               assets               to               produce               sales.

    This               value               is               derived               by               dividing               sales               by               total               assets.

    Most               often,               the               higher               a               company's               total               asset               turnover,               the               more               resourcefully               its               material               goods               have               been               used.

    Total               asset               turnover               is               probably               the               most               important               ratio               to               management               as               it               shows               if               a               company's               actions               have               been               financially               efficient.

    (p.

    59-62)
                   Debt               ratios               offer               analysts               the               ability               to               see               the               quantity               of               money               a               company               is               using               to               produce               profits               that               is               coming               from               outside               sources.

    There               are               three               types               of               debt               ratios:               debt               ratio,               times               interest               earned               ratio,               and               fixed-payment               coverage               ratio.

    The               debt               ratio               measures               the               fraction               of               total               assets               financed               by               the               company's               creditors.

    This               is               calculated               by               dividing               total               liabilities               by               total               assets               and               the               higher               the               resulting               number,               the               greater               the               amount               of               outside               money               is               being               used               to               produce               profits.

    The               times               interest               earned               ratio               gauges               a               company's               ability               to               make               agreed               upon               interest               payments.

    This               is               calculated               by               dividing               earnings               before               interest               and               taxes               by               interest               and               the               higher               the               resulting               value,               the               more               capable               the               company               is               to               carry               out               its               interest               responsibilities.

    A               resulting               number               of               at               least               3.0               is               often               recommended,               although               5.0               is               the               more               preferred               value.

    The               fixed-payment               coverage               ratio               measures               a               company's               ability               to               meet               all               its               fixed-payments               commitments,               such               as               lease               payments,               loan               interest               and               principal,               and               preferred               stock               dividends.

    Just               like               with               the               times               interest               earned               ratio,               the               higher               the               resulting               value,               the               better.

    To               calculate               this,               the               sum               of               earnings               before               interest               &               taxes               and               lease               payments               is               divided               by               the               sum               of               interest,               lease               payments,               and               the               product               of               the               sum               of               principal               payments               and               preferred               stock               dividends               and               1               divided               by               1               minus               the               corporate               tax               rate               applicable               to               the               company's               income.

    (p.

    62-65)
                   Profitability               ratios               allow               analysts               to               measure               a               company's               profits               with               regards               to               a               given               amount               of               sales,               particular               amount               of               assets,               or               the               owner's               investment.

    There               are               seven               profitability               ratios:               common-size               income               statements,               gross               profit               margin,               operating               profit               margin,               net               profit               margin,               earnings               per               share               (EPS),               return               on               total               assets               (ROA),               and               return               on               common               equity               (ROE).

    A               common-size               income               statement               is               an               income               statement               where               each               item               is               shown               as               a               proportion               of               sales.

    The               gross               profit               margin               measures               the               fraction               of               every               sales               dollar               after               a               company               has               paid               for               its               merchandise.

    This               value               is               derived               by               dividing               the               remainder               of               sales               minus               cost               of               goods               sold               by               sales.

    The               operating               profit               margin               measures               the               proportion               of               every               sales               dollar               left               over               after               all               costs               and               expenses,               not               including               interest,               taxes,               and               preferred               stock               dividends,               are               removed.

    This               is               calculated               by               dividing               operating               profits               by               sales.

    The               net               profit               margin               measures               the               percentage               of               every               sales               dollar               left               over               after               all               costs               and               expenses,               this               time               including               interest,               taxes,               and               preferred               stock               dividends,               have               been               subtracted.

    This               is               calculated               by               dividing               earnings               available               for               common               stockholders               by               sales.

    The               EPS               characterizes               the               dollar               quantity               earned               on               the               part               of               every               outstanding               share               of               common               stock.

    It               is               calculated               by               dividing               earnings               available               for               common               stockholders               by               the               number               of               shares               of               common               stock               outstanding.

    The               ROA               measures               the               on               the               whole               effectiveness               of               a               company's               management               in               producing               profits               with               its               accessible               assets.

    This               is               derived               by               dividing               the               earnings               available               for               common               stockholders               by               the               total               assets.

    The               ROE               gauges               the               return               earned               on               the               common               stockholders'               investment               in               the               company.

    This               is               calculated               by               dividing               the               earnings               available               for               common               stockholders               by               the               common               stock               equity.

    (p.

    65-69)
                   Market               ratios               compare               a               company's               market               value               to               particular               accounting               costs,               as               measured               by               its               present               share               price.

    There               are               two               market               ratios:               price/earnings               (P/E)               ratio               and               market/book               (M/B)               ratio.

    The               P/E               ratio               measures               the               quantity               that               investors               are               prepared               to               pay               for               each               dollar               of               a               company's               earnings.

    With               a               higher               P/E               ratio               comes               higher               investor               assurance.

    This               is               calculated               by               dividing               the               market               price               per               share               of               common               stock               by               the               earnings               per               share.

    The               M/B               ratio               gives               an               evaluation               of               how               investors               see               a               company's               performance.

    In               order               to               calculate               the               M/B               ratio,               the               book               value               per               share               of               common               stock               must               first               be               calculated,               which               is               done               by               dividing               common               stock               equity               by               the               number               of               shares               of               common               stock               outstanding.

    Then,               to               figure               out               the               M/B               ratio,               the               market               price               per               share               of               common               stock               is               divided               by               the               book               value               per               share               of               common               stock.

    (p.

    69-70)
                   All               of               these               financial               ratios               can               be               utilized               to               give               an               idea               of               the               financial               strength               of               a               company.

    Managers               can               use               these               numbers               to               evaluate               their               own               processes,               policies,               and               performance.

    Potential               investors               can               utilize               these               numbers               to               decide               whether               or               not               they               want               to               invest.

    Potential               creditors               can               base               their               decisions               on               whether               to               extend               credit               off               of               these               financial               ratios.

    Ratios               are               an               easy               way               to               compare               two               companies               in               the               same               industry               as               well               as               an               easy               way               for               a               company               to               measure               itself               against               its               own               past               performance.
                   References
                   Gitman,               L.

    (2009).

    Principles               of               Managerial               Finance               (12th               ed.).

    Pearson               Prentice               Hall:               Boston,               MA






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