UW-Milwaukee BUSADM 201 - Exploring Ratios (2 pages)

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Exploring Ratios

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Exploring Ratios


Learning about accounting ratios.

Lecture number:
Lecture Note
University of Wisconsin-Milwaukee
Busadm 201 - Introduction to Financial Accounting

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Bus Adm 201 Lecture 3 Outline of Last Lecture II More on Financial Statements III Current Assets IV The Classified Balance Sheet V Long term Investments VI PP E VII Intangible Assets Long term Liabilities Current Liabilities Stockholders Equity Outline of Current Lecture VIII Profitability Ratios IX Current Ratio Formula X Debts to total assets XI Free Cash Flow Ratio Current Lecture Profitability Ratios measures the success of a company s ability to generate a profit Ratio Discussed Earnings Per Share EPS EPS Net Income Preferred Dividends Average Common Shares Outstanding Liquidity Ratios measures short term ability of company to pay its debts Ratio Discussed Working Capital Current Ratio Working Capital Equals Current Assets Current Liabilities Current Ratio Formula Current Assets Current Liabilities Express as X 1 The more working capital and higher current ratio the more likely current liabilities will be paid when due These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Lenders often require that the company maintain a 2 1 ratio at all times Solvency Ratios measures of the ability of a company to survive over a long period of time Ratios Discussed Debt to Asset percentage Free cash flow Debts to Total Assets Ratio Formula Total Liabilities Total Assets multiply by 100 to create Note Often used in risk analysis The greater the debt to asset ratio the greater the risk Free Cash Flow Ratio Cash provided by operations Capital expenditures Dividends paid Free Cash Flow Note Considered as excess cash available after spending to maintain operations and satisfy hareholders

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