2013년 12월 3일 화요일

오후 9:25

By Angelina Richison

In: Debt to Equity Ratio Formula, Equity to Debt Ratio

About 'debt to equity ratio equation'|How to read a Balance Sheet

Ｉｎｔｒｏｄｕｃｔｉｏｎ               Ｉｎｖｅｓｔｏｒｓ               ａｎｄ               ｏｔｈｅｒ               ｅｘｔｅｒｎａｌ               ｕｓｅｒｓ               ｏｆ               ｆｉｎａｎｃｉａｌ               ｉｎｆｏｒｍａｔｉｏｎ               ｗｉｌｌ               ｏｆｔｅｎ               ｎｅｅｄ               ｔｏ               ｍｅａｓｕｒｅ               ｔｈｅ               ｐｅｒｆｏｒｍａｎｃｅ               ａｎｄ               ｆｉｎａｎｃｉａｌ               ｈｅａｌｔｈ               ｏｆ               ａｎ               ｏｒｇａｎｉｚａｔｉｏｎ.

Ｔｈｉｓ               ｉｓ               ｄｏｎｅ               ｉｎ               ｏｒｄｅｒ               ｔｏ               ｅｖａｌｕａｔｅ               ｔｈｅ               ｓｕｃｃｅｓｓ               ｏｆ               ｔｈｅ               ｂｕｓｉｎｅｓｓ,               ｄｅｔｅｒｍｉｎｅ               ａｎｙ               ｗｅａｋｎｅｓｓｅｓ               ｏｆ               ｔｈｅ               ｂｕｓｉｎｅｓｓ,               ｃｏｍｐａｒｅ               ｃｕｒｒｅｎｔ               ａｎｄ               ｐａｓｔ               ｐｅｒｆｏｒｍａｎｃｅ,               ａｎｄ               ｃｏｍｐａｒｅ               ｃｕｒｒｅｎｔ               ｐｅｒｆｏｒｍａｎｃｅ               ｗｉｔｈ               ｉｎｄｕｓｔｒｙ               ｓｔａｎｄａｒｄｓ.

Ｆｉｎａｎｃｉａｌｌｙ               ｓｔａｂｌｅ               ｏｒｇａｎｉｚａｔｉｏｎｓ               ａｒｅ               ｄｅｓｉｒａｂｌｅ,               ｂｅｃａｕｓｅ               ａ               ｆｉｎａｎｃｉａｌｌｙ               ｓｔａｂｌｅ               ｂｕｓｉｎｅｓｓ               ｉｓ               ｏｎｅ               ｔｈａｔ               ｓｕｃｃｅｓｓｆｕｌｌｙ               ｅｎｓｕｒｅｓ               ｉｔｓ               ａｂｉｌｉｔｙ               ｔｏ               ｇｅｎｅｒａｔｅ               ｉｎｃｏｍｅ               ｆｏｒ               ｉｎｖｅｓｔｏｒｓ               ａｎｄ               ｒｅｔａｉｎ               ｏｒ               ｉｎｃｒｅａｓｅ               ｖａｌｕｅ.
               Ｔｈｅｒｅ               ａｒｅ               ｍａｎｙ               ｄｉｆｆｅｒｅｎｔ               ｍｅｔｈｏｄｓ               ｔｈａｔ               ｃａｎ               ｂｅ               ｕｓｅｄ               ａｌｏｎｅ               ｏｒ               ｔｏｇｅｔｈｅｒ               ｔｏ               ｈｅｌｐ               ｉｎｖｅｓｔｏｒｓ               ａｓｓｅｓｓ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｂｉｌｉｔｙ               ｏｆ               ａｎ               ｏｒｇａｎｉｚａｔｉｏｎ.

Ｏｎｅ               ｏｆ               ｔｈｅ               ｍｏｓｔ               ｃｏｍｍｏｎ               ｍｅｔｈｏｄｓ               ｉｓ               ｆｉｎａｎｃｉａｌ               ｒａｔｉｏ               ａｎａｌｙｓｉｓ.

Ｔｈｅ               ｂａｓｉｃ               ｒａｔｉｏｓ               ｉｎｃｌｕｄｅ               ｆｉｖｅ               ｃａｔｅｇｏｒｉｅｓ:               ｐｒｏｆｉｔａｂｉｌｉｔｙ               ｒａｔｉｏｓ,               ｌｉｑｕｉｄｉｔｙ               ｒａｔｉｏｓ,               ｄｅｂｔ               ｒａｔｉｏｓ,               ａｎｄ               ａｓｓｅｔ               ａｃｔｉｖｉｔｙ               ｒａｔｉｏｓ.
               Ｐｒｏｆｉｔａｂｉｌｉｔｙ               Ｒａｔｉｏｓ
               Ｐｒｏｆｉｔａｂｉｌｉｔｙ               ｒａｔｉｏｓ               ｍｅａｓｕｒｅ               ｔｈｅ               ｐｒｏｆｉｔａｂｉｌｉｔｙ               ｏｆ               ｔｈｅ               ｏｒｇａｎｉｚａｔｉｏｎ.

Ｔｈｅｙ               ｉｎｃｌｕｄｅ               ｔｈｅ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ,               ｏｐｅｒａｔｉｎｇ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ,               ｎｅｔ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ,               ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ａｓｓｅｔｓ               (ＲＯＡ)               ｒａｔｉｏ,               ａｎｄ               ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ｅｑｕｉｔｙ               (ＲＯＥ)               ｒａｔｉｏ.
               Ｔｈｅ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｓａｌｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｐｒｏｆｉｔ               ｒｅｍａｉｎｉｎｇ               ｆｒｏｍ               ｅａｃｈ               ｓａｌｅｓ               ｄｏｌｌａｒ               ａｆｔｅｒ               ｓｕｂｔｒａｃｔｉｎｇ               ｔｈｅ               ｃｏｓｔ               ｏｆ               ｇｏｏｄｓ               ｓｏｌｄ.

Ｅｘａｍｐｌｅ:               ａ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｏｆ               0.05               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               5%               ｏｆ               ｓａｌｅｓ               ｒｅｖｅｎｕｅ               ｉｓ               ｌｅｆｔ               ｔｏ               ｕｓｅ               ｆｏｒ               ｐｕｒｐｏｓｅｓ               ｏｔｈｅｒ               ｔｈａｎ               ｔｈｅ               ｃｏｓｔ               ｏｆ               ｇｏｏｄｓ               ｓｏｌｄ.
               Ｔｈｅ               ｏｐｅｒａｔｉｎｇ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｅａｒｎｉｎｇｓ               ｂｅｆｏｒｅ               ｉｎｃｏｍｅ               ａｎｄ               ｔａｘｅｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｓａｌｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｈｏｗ               ｅｆｆｅｃｔｉｖｅ               ｔｈｅ               ｃｏｍｐａｎｙ               ｉｓ               ａｔ               ｋｅｅｐｉｎｇ               ｐｒｏｄｕｃｔｉｏｎ               ｃｏｓｔｓ               ｌｏｗ.

Ｅｘａｍｐｌｅ:               ａｎ               ｏｐｅｒａｔｉｎｇ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｏｆ               0.17               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ａｆｔｅｒ               ｓｕｂｔｒａｃｔｉｎｇ               ａｌｌ               ｏｐｅｒａｔｉｎｇ               ｅｘｐｅｎｓｅｓ               17%               ｏｆ               ｓａｌｅｓ               ｒｅｖｅｎｕｅｓ               ｒｅｍａｉｎ.
               Ｔｈｅ               ｎｅｔ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｎｅｔ               ｅａｒｎｉｎｇｓ               ａｖａｉｌａｂｌｅ               ｔｏ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｓａｌｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｎｅｔ               ｐｒｏｆｉｔ               ｆｏｒ               ｅａｃｈ               ｄｏｌｌａｒ               ｏｆ               ｓａｌｅｓ               ｔｈａｔ               ｒｅｍａｉｎｓ               ａｆｔｅｒ               ｓｕｂｔｒａｃｔｉｎｇ               ａｌｌ               ｅｘｐｅｎｓｅｓ.

Ｅｘａｍｐｌｅ:               ａ               ｎｅｔ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｏｆ               0.084               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               8.4%               ｏｆ               ｅａｃｈ               ｓａｌｅｓ               ｄｏｌｌａｒ               ｒｅｍａｉｎｓ               ａｆｔｅｒ               ａｌｌ               ｅｘｐｅｎｓｅｓ               ａｒｅ               ｐａｉｄ.
               Ｔｈｅ               ＲＯＡ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｎｅｔ               ｅａｒｎｉｎｇｓ               ａｖａｉｌａｂｌｅ               ｔｏ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ               (ｎｅｔ               ｉｎｃｏｍｅ)               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｏｔａｌ               ａｓｓｅｔｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｉｎｃｏｍｅ               ｅａｃｈ               ｄｏｌｌａｒ               ｏｆ               ａｓｓｅｔｓ               ｇｅｎｅｒａｔｅｓ.

Ｅｘａｍｐｌｅ:               ａｎ               ＲＯＡ               ｒａｔｉｏ               ｏｆ               0.0568               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｅａｃｈ               ｄｏｌｌａｒ               ｏｆ               ｃｏｍｐａｎｙ               ａｓｓｅｔｓ               ｐｒｏｄｕｃｅｄ               ｉｎｃｏｍｅ               ｏｆ               ａｌｍｏｓｔ               $0.06.
               Ｔｈｅ               ＲＯＥ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｎｅｔ               ｅａｒｎｉｎｇｓ               ａｖａｉｌａｂｌｅ               ｔｏ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ'               ｅｑｕｉｔｙ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｉｎｃｏｍｅ               ｐｒｏｄｕｃｅｄ               ｆｏｒ               ｅａｃｈ               ｄｏｌｌａｒ               ｔｈａｔ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ               ｈａｖｅ               ｉｎｖｅｓｔｅｄ.

Ｅｘａｍｐｌｅ:               Ａｎ               ＲＯＥ               ｒａｔｉｏ               ｏｆ               0.0869               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｒｅｔｕｒｎｅｄ               8.69%               ｆｏｒ               ｅｖｅｒｙ               ｄｏｌｌａｒ               ｉｎｖｅｓｔｅｄ               ｂｙ               ｃｏｍｍｏｎ               ｓｔｏｃｋｈｏｌｄｅｒｓ.
               Ｌｉｑｕｉｄｉｔｙ               Ｒａｔｉｏｓ
               Ｌｉｑｕｉｄｉｔｙ               ｒａｔｉｏｓ               ｍｅａｓｕｒｅ               ｔｈｅ               ｏｒｇａｎｉｚａｔｉｏｎｓ               ａｂｉｌｉｔｙ               ｔｏ               ｍｅｅｔ               ｓｈｏｒｔ-ｔｅｒｍ               ｏｂｌｉｇａｔｉｏｎｓ.

Ｔｈｅｓｅ               ｉｎｃｌｕｄｅ               ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ａｎｄ               ｔｈｅ               ｑｕｉｃｋ               ｒａｔｉｏ.
               Ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｔｏｔａｌ               ａｍｏｕｎｔ               ｏｆ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｈｅ               ｔｏｔａｌ               ａｍｏｕｎｔ               ｏｆ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｗｈｅｔｈｅｒ               ｔｈｅ               ｃｏｍｐａｎｙ               ｈａｓ               ａ               ｓｕｆｆｉｃｉｅｎｔ               ａｍｏｕｎｔ               ｏｆ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｔｏ               ｐａｙ               ｏｆｆ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ.

Ｅｘａｍｐｌｅ:               ａ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｏｆ               2.57               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｈａｓ               $2.57               ｗｏｒｔｈ               ｏｆ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｆｏｒ               ｅｖｅｒｙ               $1.00               ｏｆ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ.
               Ｔｈｅ               ｑｕｉｃｋ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｔｏｔａｌ               ａｍｏｕｎｔ               ｏｆ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｌｅｓｓ               ｉｎｖｅｎｔｏｒｙ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｈｅ               ｔｏｔａｌ               ａｍｏｕｎｔ               ｏｆ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ｃｏｍｐａｎｙ'ｓ               ａｂｉｌｉｔｙ               ｔｏ               ｒｅｐａｙ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ａｆｔｅｒ               ｔｈｅ               ｌｅａｓｔ               ｌｉｑｕｉｄ               ｏｆ               ｉｔｓ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｉｓ               ｒｅｍｏｖｅｄ               ｆｒｏｍ               ｔｈｅ               ｅｑｕａｔｉｏｎ.

Ｅｘａｍｐｌｅ:               ａ               ｑｕｉｃｋ               ｒａｔｉｏ               ｏｆ               2.48               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｃｏｕｌｄ               ｐａｙ               ｏｆｆ               248%               ｏｆ               ｉｔｓ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ｂｙ               ｌｉｑｕｉｄａｔｉｎｇ               ａｌｌ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｏｔｈｅｒ               ｔｈａｎ               ｉｎｖｅｎｔｏｒｙ.
               Ｄｅｂｔ               Ｒａｔｉｏｓ
               Ｄｅｂｔ               ｒａｔｉｏｓ               ｍｅａｓｕｒｅ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｄｅｂｔ               ａｎ               ｏｒｇａｎｉｚａｔｉｏｎ               ｉｓ               ｕｓｉｎｇ               ａｎｄ               ｔｈｅ               ａｂｉｌｉｔｙ               ｏｆ               ｔｈｅ               ｏｒｇａｎｉｚａｔｉｏｎ               ｔｏ               ｐａｙ               ｏｆｆ               ｔｈｅ               ｄｅｂｔ.

Ｔｈｅｓｅ               ｉｎｃｌｕｄｅ               ｔｈｅ               ｄｅｂｔ               ｔｏ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｒａｔｉｏ               ａｎｄ               ｔｈｅ               ｔｉｍｅｓ               ｉｎｔｅｒｅｓｔ               ｅａｒｎｅｄ               ｒａｔｉｏ.
               Ｔｈｅ               ｄｅｂｔ               ｔｏ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ａｍｏｕｎｔ               ｏｆ               ｔｏｔａｌ               ｄｅｂｔ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｏｔａｌ               ａｓｓｅｔｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｏｆ               ｔｈｅ               ｃｏｍｐａｎｙ'ｓ               ａｓｓｅｔｓ               ｔｈａｔ               ｉｓ               ｆｉｎａｎｃｅｄ               ｗｉｔｈ               ｄｅｂｔ.

Ｅｘａｍｐｌｅ:               ａ               ｄｅｂｔ               ｔｏ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｒａｔｉｏ               ｏｆ               0.35               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               35%               ｏｆ               ｃｏｍｐａｎｙ               ａｓｓｅｔｓ               ａｒｅ               ｆｉｎａｎｃｅｄ               ｗｉｔｈ               ｎｏｎ-ｏｗｎｅｒ               ｆｕｎｄｓ.
               Ｔｈｅ               ｔｉｍｅｓ               ｉｎｔｅｒｅｓｔ               ｅａｒｎｅｄ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｅａｒｎｉｎｇｓ               ｂｅｆｏｒｅ               ｉｎｔｅｒｅｓｔ               ａｎｄ               ｔａｘｅｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｉｎｔｅｒｅｓｔ               ｅｘｐｅｎｓｅ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ｍａｒｇｉｎ               ｏｆ               ｓａｆｅｔｙ               ｉｎ               ｔｈｅ               ａｂｉｌｉｔｙ               ｔｏ               ｒｅｐａｙ               ｉｎｔｅｒｅｓｔ               ｐａｙｍｅｎｔｓ               ｗｉｔｈ               ｃｕｒｒｅｎｔ               ｐｅｒｉｏｄ               ｏｐｅｒａｔｉｎｇ               ｉｎｃｏｍｅ.

Ｅｘａｍｐｌｅ:               ａ               ｔｉｍｅｓ               ｉｎｔｅｒｅｓｔ               ｅａｒｎｅｄ               ｒａｔｉｏ               ｏｆ               5.67               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｅａｒｎｅｄ               $5.67               ｗｏｒｔｈ               ｏｆ               ｏｐｅｒａｔｉｎｇ               ｉｎｃｏｍｅ               ｆｏｒ               ｅａｃｈ               $1.00               ｏｆ               ｉｎｔｅｒｅｓｔ               ｅｘｐｅｎｓｅ               ｉｎｃｕｒｒｅｄ.
               Ａｓｓｅｔ               Ａｃｔｉｖｉｔｙ               Ｒａｔｉｏｓ
               Ａｓｓｅｔ               ａｃｔｉｖｉｔｙ               ｒａｔｉｏｓ               ｍｅａｓｕｒｅ               ｈｏｗ               ｅｆｆｉｃｉｅｎｔｌｙ               ｔｈｅ               ｃｏｍｐａｎｙ               ｉｓ               ｕｓｉｎｇ               ｉｔｓ               ａｓｓｅｔｓ.

Ｔｈｅｓｅ               ｉｎｃｌｕｄｅ               ｔｈｅ               ａｖｅｒａｇｅ               ｃｏｌｌｅｃｔｉｏｎ               ｐｅｒｉｏｄ               ｒａｔｉｏ,               ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ,               ａｎｄ               ｔｈｅ               ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ.
               Ｔｈｅ               ａｖｅｒａｇｅ               ｃｏｌｌｅｃｔｉｏｎ               ｐｅｒｉｏｄ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｔｏｔａｌ               ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｈｅ               ａｖｅｒａｇｅ               ｃｒｅｄｉｔ               ｓａｌｅｓ               ｐｅｒ               ｄａｙ,               ｗｈｉｃｈ               ｉｓ               ｔｈｅ               ａｎｎｕａｌ               ｃｒｅｄｉｔ               ｓａｌｅｓ               ｄｉｖｉｄｅｄ               ｂｙ               365.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｈｏｗ               ｌｏｎｇ               ｉｔ               ｔａｋｅｓ               ａ               ｃｏｍｐａｎｙ               ｔｏ               ｃｏｌｌｅｃｔ               ｃｒｅｄｉｔ               ｓａｌｅｓ               ｆｒｏｍ               ｃｕｓｔｏｍｅｒｓ.

Ｅｘａｍｐｌｅ:               ａｎ               ａｖｅｒａｇｅ               ｃｏｌｌｅｃｔｉｏｎ               ｐｅｒｉｏｄ               ｒａｔｉｏ               ｏｆ               65.70               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｏｎ               ａｖｅｒａｇｅ               ｉｔ               ｔａｋｅｓ               65.70               ｄａｙｓ               ｆｏｒ               ｃｕｓｔｏｍｅｒｓ               ｔｏ               ｐａｙ               ｏｆｆ               ｔｈｅｉｒ               ａｃｃｏｕｎｔ               ｂａｌａｎｃｅｓ.
               Ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｈｅ               ｔｏｔａｌ               ｓａｌｅｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｏｔａｌ               ｉｎｖｅｎｔｏｒｙ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｉｆ               ｔｈｅ               ｌｅｖｅｌ               ｏｆ               ｉｎｖｅｎｔｏｒｙ               ｉｓ               ａｐｐｒｏｐｒｉａｔｅ               ｉｎ               ｒｅｇａｒｄ               ｔｏ               ｃｏｍｐａｎｙ               ｓａｌｅｓ.

Ａ               ｈｉｇｈ               ｒａｔｉｏ               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｈａｓ               ｉｎｖｅｎｔｏｒｙ               ｔｈａｔ               ｓｅｌｌｓ               ｗｅｌｌ,               ｗｈｉｌｅ               ａ               ｌｏｗ               ｒａｔｉｏ               ｍｅａｎｓ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｈａｓ               ｉｎｖｅｎｔｏｒｙ               ｔｈａｔ               ｄｏｅｓ               ｎｏｔ               ｓｅｌｌ               ｗｅｌｌ.

Ｅｘａｍｐｌｅ:               ａｎ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｏｆ               66.67               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｉｎｖｅｎｔｏｒｙ               ｗａｓ               ｓｏｌｄ               66.67               ｔｉｍｅｓ               ｄｕｒｉｎｇ               ｔｈｅ               ｙｅａｒ.
               Ｔｈｅ               ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               ｂｙ               ｔａｋｉｎｇ               ｔｏｔａｌ               ｓａｌｅｓ               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｏｔａｌ               ａｓｓｅｔｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｕｓｅｄ               ｔｏ               ｄｅｔｅｒｍｉｎｅ               ｈｏｗ               ｅｆｆｅｃｔｉｖｅ               ｔｈｅ               ｃｏｍｐａｎｙ               ｉｓ               ａｔ               ｕｓｉｎｇ               ａｌｌ               ａｓｓｅｔｓ               ｔｏ               ｇｅｎｅｒａｔｅ               ｓａｌｅｓ.

Ｅｘａｍｐｌｅ:               ａ               ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｏｆ               0.68               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               ｔｈｅ               ｄｏｌｌａｒ               ａｍｏｕｎｔ               ｏｆ               ｓａｌｅｓ               ｗａｓ               68%               ｏｆ               ａｌｌ               ａｓｓｅｔｓ.
               Ｃｏｎｃｌｕｓｉｏｎ
               Ｆｉｎａｎｃｉａｌ               ｒａｔｉｏ               ａｎａｌｙｓｉｓ               ｃａｎ               ｂｅ               ａｎ               ｉｎｖａｌｕａｂｌｅ               ｒｅｓｏｕｒｃｅ               ｔｏ               ｉｎｖｅｓｔｏｒｓ               ａｎｄ               ｅｘｔｅｒｎａｌ               ｕｓｅｒｓ               ｗｈｏ               ｍｕｓｔ               ｄｅｔｅｒｍｉｎｅ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｂｉｌｉｔｙ               ｏｆ               ａｎ               ｏｒｇａｎｉｚａｔｉｏｎ.

Ｔｈｉｓ               ｉｓ               ｉｍｐｏｒｔａｎｔ,               ｂｅｃａｕｓｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｂｉｌｉｔｙ               ｒｅｐｒｅｓｅｎｔｓ               ｔｈｅ               ｓｏｕｎｄｎｅｓｓ,               ｄｅｐｅｎｄａｂｉｌｉｔｙ,               ａｎｄ               ｅｆｆｉｃｉｅｎｃｙ               ｏｆ               ｔｈｅ               ｂｕｓｉｎｅｓｓ.

Ｕｎｄｅｒｓｔａｎｄｉｎｇ               ｈｏｗ               ｔｏ               ｃａｌｃｕｌａｔｅ               ａｎｄ               ｉｎｔｅｒｐｒｅｔ               ｆｉｎａｎｃｉａｌ               ｒａｔｉｏｓ               ｉｓ               ａｎ               ｉｍｐｏｒｔａｎｔ               ｓｔｅｐ               ｉｎ               ａｎａｌｙｚｉｎｇ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｈｅａｌｔｈ               ｏｆ               ａｎ               ｏｒｇａｎｉｚａｔｉｏｎ.

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2013년 11월 30일 토요일

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About 'acceptable debt to equity ratio'|Debt Rattle, July 9 2008: The year of everything else

               Ｍｅｍｏｒａｎｄｕｍ
               ＴＯ:               ＥＥＣ               Ｃｈｉｅｆ               Ｅｘｅｃｕｔｉｖｅ               Ｏｆｆｉｃｅｒ               (ＣＥＯ)
               ＦＲＯＭ:               Ｌｅｌａ               Ｋｅｅｌ,               ＥＥＣ               Ｆｉｎａｎｃｉａｌ               Ａｎａｌｙｓｔ
               ＤＡＴＥ:               Ｊａｎｕａｒｙ               10,               2011
               ＳＵＢＪＥＣＴ:               Ｆｉｎａｎｃｉａｌ               Ｐｅｒｆｏｒｍａｎｃｅ               Ａｎａｌｙｓｉｓ
               Ｉｎｔｒｏｄｕｃｔｉｏｎ
               Ｆｉｎａｎｃｉａｌ               ｒａｔｉｏｓ               ａｒｅ               ｖｅｒｙ               ｓｉｇｎｉｆｉｃａｎｔ               ｂｅｃａｕｓｅ               ｔｈｅｙ               ａｎａｌｙｚｅ               ｎｕｍｂｅｒｓ               ａ               ｃｏｍｐａｎｙ               ｍａｉｎｔａｉｎｓ               ｏｎ               ｔｈｅｉｒ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ.

Ａｎａｌｙｚｉｎｇ               ｆｉｎａｎｃｉａｌ               ｒａｔｉｏｓ               ｐｒｅｓｅｎｔｓ               ｗａｙｓ               ｆｏｒ               ｉｎｔｅｒｎａｌ               ａｎｄ               ｅｘｔｅｒｎａｌ               ｖｉｅｗｅｒｓ               ｔｏ               ｅｓｔａｂｌｉｓｈ               ｔｈｅ               ｍｏｎｅｔａｒｙ               ｐｏｓｉｔｉｏｎ               ｏｆ               ａ               ｃｏｍｐａｎｙ,               ａｓ               ｗｅｌｌ               ａｓ               ｔｈｅ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｆｉｎａｎｃｉａｌ               ｒａｔｉｏｓ               ｃａｎ               ａｉｄ               ｉｎ               ａｎｓｗｅｒｉｎｇ               ｄｅｃｉｓｉｖｅ               ｑｕｅｓｔｉｏｎｓ               ａｂｏｕｔ               Ｅｄｄｉｓｏｎ               Ｅｌｅｃｔｒｏｎｉｃｓ               Ｃｏｍｐａｎｙ               (ＥＥＣ),               ｓｕｃｈ               ａｓ               ｗｈｅｔｈｅｒ               ｗｅ               ａｒｅ               ｅｘｃｅｓｓｉｖｅｌｙ               ｃａｒｒｙｉｎｇ               ｌｉａｂｉｌｉｔｙ               ｏｒ               ｓｔｏｃｋ,               ｉｆ               ｏｕｒ               ｃｕｓｔｏｍｅｒｓ               ａｒｅ               ｒｅｉｍｂｕｒｓｉｎｇ               ｉｎ               ａｇｒｅｅｍｅｎｔ               ｗｉｔｈ               ｔｅｒｍｓ,               ｗｈｅｔｈｅｒ               ｏｕｒ               ｏｐｅｒａｔｉｏｎａｌ               ｅｘｐｅｎｓｅｓ               ａｒｅ               ｅｘｃｅｓｓｉｖｅ,               ａｎｄ               ｉｆ               ｔｈｅ               ａｓｓｅｔｓ               ｏｆ               ｔｈｅ               ｃｏｍｐａｎｙ               ａｒｅ               ｂｅｉｎｇ               ｃｏｒｒｅｃｔｌｙ               ｕｓｅｄ               ｔｏ               ｐｒｏｄｕｃｅ               ｉｎｃｏｍｅ               Ｆｏｒ               ｔｈｉｓ               ｍｅｍｏ               ｆｉｎａｎｃｉａｌ               ｒａｔｉｏｓ               ｗｉｌｌ               ｂｅ               ｅｘｐｌａｉｎｅｄ               ａｎｄ               ｃａｌｃｕｌａｔｅｄ               ｆｏｒ               Ｗａｌ-Ｍａｒｔ,               ａｎｄ               ｒｅｃｏｍｍｅｎｄａｔｉｏｎ               ｗｉｌｌ               ａｌｓｏ               ｂｅ               ｄｏｎｅ               ｆｏｒ               ａｎａｌｙｚｉｎｇ               ＥＥＣ'ｓ               ｆｉｎａｎｃｉａｌ               ｐｅｒｆｏｒｍａｎｃｅ.
               Ｒｅｔｕｒｎ               ｏｎ               Ａｓｓｅｔｓ
               Ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ａｓｓｅｔｓ               (ＲＯＡ)               ｉｓ               ａ               ｒａｔｉｏ               ｔｈａｔ               ｄｅｔｅｒｍｉｎｅｓ               ｔｈｅ               ｐｒｏｆｉｔ               ｏｎ               ｎｅｔ               ｒｅｖｅｎｕｅ               ｏｎ               ｏｖｅｒａｌｌ               ａｓｓｅｔｓ               ｆｏｒ               ａ               ｃｏｍｐａｎｙ               ａｆｔｅｒ               ｉｎｔｅｒｅｓｔ               ａｎｄ               ｔａｘｅｓ               ｈａｖｅ               ｂｅｅｎ               ｐａｉｄ.

Ｔｈｅ               ＲＯＡ               ｍｅａｓｕｒｅｍｅｎｔ               ｉｓ               ａｎ               ｉｎｄｉｃａｔｉｏｎ               ａｓ               ｔｏ               ｈｏｗ               ｒｅｓｏｕｒｃｅｆｕｌ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ｉｎ               ｕｔｉｌｉｚｉｎｇ               ｔｈｅｉｒ               ａｓｓｅｔｓ               ｔｏ               ｐｒｏｄｕｃｅ               ｉｎｃｏｍｅ.

ＲＯＡ               =               ｔｏｔａｌ               ｎｅｔ               ｉｎｃｏｍｅ/ｔｏｔａｌ               ａｓｓｅｔｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ＲＯＡ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｉｎ               ｔａｋｉｎｇ               Ｗａｌ-Ｍａｒｔ'ｓ               ｎｅｔ               ｉｎｃｏｍｅ               ｆｏｒ               2010               ａｎｄ               ｄｉｖｉｄｉｎｇ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｗｏｕｌｄ               ｂｅ               84%               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).

Ｔｈｉｓ               ＲＯＡ               ｎｕｍｂｅｒ               ｉｓ               ｇｏｏｄ               ａｓ               ｉｔ               ｉｎｄｉｃａｔｅｓ               ｔｈａｔ               Ｗａｌ-Ｍａｒｔ               ｉｓ               ｇｅｎｅｒａｔｉｎｇ               ｍｏｒｅ               ｃａｐｉｔａｌ               ｏｎ               ｆｅｗｅｒ               ａｓｓｅｔｓ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｒｅｔｕｒｎ               ｏｎ               Ｅｑｕｉｔｙ
               Ｔｈｅ               ｒｅｔｕｒｎ               ｏｎ               ｅｑｕｉｔｙ               (ＲＯＥ)               ｉｓ               ａ               ｒａｔｉｏ               ｔｈａｔ               ｍｅａｓｕｒｅｓ               ｒｅｔｕｒｎ               ｏｎ               ｔｈｅ               ｓｔｏｃｋｈｏｌｄｅｒ               ｉｎｖｅｓｔｍｅｎｔｓ               ｉｎ               ａ               ｃｏｍｐａｎｙ.

Ｔｈｅ               ＲＯＥ               ｗｉｌｌ               ａｉｄ               ｉｎ               ｄｅｔｅｒｍｉｎｉｎｇ               ａ               ｃｏｍｐａｎｙ'ｓ               ｐｒｏｆｉｔｓ               ｂｙ               ｄｉｓｃｌｏｓｉｎｇ               ｈｏｗ               ｍｕｃｈ               ｉｎｃｏｍｅ               ｗａｓ               ｐｒｏｄｕｃｅｄ               ｗｉｔｈ               ｓｈａｒｅｈｏｌｄｅｒ               ｉｎｖｅｓｔｍｅｎｔ               ｍｏｎｅｙ.

Ｔｈｅ               ｕｓｕａｌ               ｗａｙ               ｓｈａｒｅｈｏｌｄｅｒｓ               ｗｉｌｌ               ｖｉｅｗ               ｔｈｅ               ｓｈａｒｅｈｏｌｄｅｒｓ               ｅｑｕｉｔｙ               ｏｆ               ａ               ｃｏｍｐａｎｙ               ｗｏｕｌｄ               ｂｅ               ａｓ               ｔｈｅ               ａｃｃｏｕｎｔｉｎｇ               "ｂｏｏｋ               ｖａｌｕｅ"               ｏｆ               ｔｈｅ               ｂｕｓｉｎｅｓｓ.

ＲＯＥ               =               ｎｅｔ               ｉｎｃｏｍｅ/ｔｏｔａｌ               ｓｔｏｃｋｈｏｌｄｅｒ               ｅｑｕｉｔｙ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ＲＯＥ               (Ｍｏｔｌｅｙ               Ｆｏｏｌ               Ｓｔａｆｆ,               2011).

Ａｇａｉｎ,               ｌｅｔ'ｓ               ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｎｅｔ               ｉｎｃｏｍｅ               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅ               ｔｏｔａｌ               ｓｈａｒｅｈｏｌｄｅｒ               ｅｑｕｉｔｙ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｗｏｕｌｄ               ｂｅ               20%.

Ｔｈｉｓ               ＲＯＥ               ｐｅｒｃｅｎｔａｇｅ               ｗｏｕｌｄ               ｉｎｄｉｃａｔｅ               ｔｈａｔ               Ｗａｌ-Ｍａｒｔ               ｉｓ               ｇｅｎｅｒａｔｉｎｇ               20               ｃｅｎｔｓ               ｏｎ               ｅａｃｈ               ｄｏｌｌａｒ               ｉｎｉｔｉａｌｌｙ               ｐｒｏｖｉｄｅｄ               ｂｙ               ｓｈａｒｅｈｏｌｄｅｒｓ               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).
               Ｇｒｏｓｓ               Ｐｒｏｆｉｔ               Ｍａｒｇｉｎ
               Ｔｈｅ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｉｓ               ａ               ｒａｔｉｏ               ｔｈａｔ               ｗｉｌｌ               ｓｈｏｗ               ｔｈｅ               ｏｐｅｒａｔｉｏｎａｌ               ｐｒｏｆｉｔｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ'ｓ               ｐｒｏｃｅｓｓｅｓ               ａｆｔｅｒ               ｖａｒｉａｂｌｅ               ｅｘｐｅｎｓｅｓ               ａｒｅ               ｔａｋｅｎ               ａｗａｙ               ｆｒｏｍ               ｒｅｖｅｎｕｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｗｉｌｌ               ｄｅｔｅｒｍｉｎｅ               ａ               ｃｏｍｐａｎｙ'ｓ               ｓｕｃｃｅｓｓ               ｉｎ               ｔｈｅｉｒ               ｐｅｒｆｏｒｍａｎｃｅ               ａｔ               ｉｔ               ｒｅｌａｔｅｓ               ｔｏ               ｐｒｉｃｅｓ               ｏｆ               ｐｒｏｄｕｃｔｓ               ａｎｄ               ａｍｏｕｎｔ               ｏｆ               ｐｒｏｄｕｃｔｓ               ｓｏｌｄ.

Ｉｔ               ｄｏｅｓ               ｔｈｉｓ               ｂｙ               ｄｉｓｃｌｏｓｉｎｇ               ｔｈｅ               ｔｏｔａｌ               ｒｅｖｅｎｕｅ               ｌｅｆｔ               ｏｖｅｒ               ａｆｔｅｒ               ｔａｋｉｎｇ               ｏｕｔ               ｆｏｒ               ｔｈｅ               ｃｏｓｔ               ｏｆ               ｓｅｌｌｉｎｇ               ｔｈｅ               ｐｒｏｄｕｃｔｓ.

Ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               =               ｇｒｏｓｓ               ｍａｒｇｉｎ/ｓａｌｅｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｇｒｏｓｓ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2010               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｎｅｔ               ｓａｌｅｓ               ａｎｄ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｗｏｕｌｄ               ｂｅ               25%               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ,               2011).

Ｔｈｉｓ               ｗｏｕｌｄ               ｂｅ               ｔｈｅ               ａｖｅｒａｇｅ               ｍａｒｋ-ｕｐ               ｔｈａｔ               Ｗａｌ-Ｍａｒｔ               ａｐｐｌｉｅｓ               ｔｏ               ｔｈｅｉｒ               ｐｒｏｄｕｃｔｓ               ｉｎ               ｏｒｄｅｒ               ｔｏ               ａｓｓｕｒｅ               ａ               ｐｒｏｆｉｔ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｄｅｂｔ/Ｅｑｕｉｔｙ               Ｒａｔｉｏ
               Ｔｈｅ               ｄｅｂｔ-ｔｏ-ｅｑｕｉｔｙ               (Ｄ/Ｅ)               ｒａｔｉｏ               ｍｅａｓｕｒｅｓ               ｔｈｅ               ｅｃｏｎｏｍｉｃ               ｒｉｓｋ               ｔｈａｔ               ａ               ｃｏｍｐａｎｙ               ｕｎｄｅｒｔａｋｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｓｐｅｃｉｆｉｅｓ               ｔｈｅ               ｔｏｔａｌ               ｅｑｕｉｔｙ               ａｎｄ               ｄｅｂｔ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ｃｕｒｒｅｎｔｌｙ               ｕｓｉｎｇ               ｔｏ               ｐａｙ               ｆｏｒ               ｉｔｓ               ａｓｓｅｔｓ.

Ｔｈｅ               ｍｅａｓｕｒｅｍｅｎｔ               ｏｆ               ｔｈｉｓ               ｗｏｕｌｄ               ｓｉｇｎｉｆｙ               ａｓ               ｔｏ               ｈｏｗ               ｍｕｃｈ               ｃａｓｈ               ｗｏｕｌｄ               ｂｅ               ｓａｆｅ               ｆｏｒ               ａ               ｃｏｍｐａｎｙ               ｔｏ               ｂｏｒｒｏｗ               ｆｏｒ               ｌｏｎｇ               ｐｅｒｉｏｄｓ               ｏｆ               ｔｉｍｅ.

Ｄ/Ｅ               =               ｌｉａｂｉｌｉｔｉｅｓ/ｓｈａｒｅｈｏｌｄｅｒｓ               ｅｑｕｉｔｙ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               Ｄ/Ｅ               (Ｉｎｖｅｓｔｉｎｇ               Ａｎｓｗｅｒｓ,               2011).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｔｏｔａｌ               ｌｉａｂｉｌｉｔｉｅｓ               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｓｈａｒｅｈｏｌｄｅｒｓ               ｅｑｕｉｔｙ               ｗｈｉｃｈ               ｗｏｕｌｄ               ｍａｋｅ               ｔｈｅ               ｐｅｒｃｅｎｔａｇｅ               ｏｆ               1.4               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011)               ｏｒ               140%.

Ｔｈｉｓ               ｍｅａｎｓ               ｔｈａｔ               ｆｏｒ               ｅｖｅｒｙ               ｄｏｌｌａｒ               ｏｆ               Ｗａｌ-Ｍａｒｔ               ｏｗｎｅｄ               ｂｙ               ｓｈａｒｅｈｏｌｄｅｒｓ,               ｔｈｅｙ               ｏｗｅ               $1.40               ｔｏ               ｃｒｅｄｉｔｏｒｓ               (Ｉｎｖｅｓｔｉｎｇ               Ａｎｓｗｅｒｓ,               2011).
               Ｄｅｂｔ               Ｒａｔｉｏ
               Ｔｈｅ               ｄｅｂｔ               ｒａｔｉｏ               ｓｉｇｎｉｆｉｅｓ               ｔｈｅ               ｔｏｔａｌ               ｄｅｂｔ               ａ               ｃｏｍｐａｎｙ               ｈａｓ               ｃｏｍｐａｒａｔｉｖｅ               ｔｏ               ｔｈｅｉｒ               ａｓｓｅｔｓ.

Ｔｈｉｓ               ｃａｌｃｕｌａｔｉｏｎ               ｗｉｌｌ               ｐｅｒｍｉｔ               ａ               ｓｕｇｇｅｓｔｉｏｎ               ｔｏ               ｂｅ               ｓｐｅｃｉｆｉｅｄ               ｏｎ               ｔｈｅ               ｌｅｖｅｒａｇｅ               ａ               ｃｏｍｐａｎｙ               ｈａｓ               ａｌｏｎｇ               ｗｉｔｈ               ｔｈｅ               ｐｏｓｓｉｂｌｅ               ｄｅｂｔ-ｌｏａｄ               ｒｉｓｋｓ               ｔｈｅ               ｃｏｍｐａｎｙ               ｈａｓ.

Ｉｎ               ｔｈｉｓ               ｒｅｓｐｅｃｔ,               ｔｈｅ               ｄｅｂｔ               ｒａｔｉｏ               ｃａｎ               ａｌｓｏ               ａｉｄ               ｓｈａｒｅｈｏｌｄｅｒｓ               ｉｎ               ｄｅｔｅｒｍｉｎｉｎｇ               ａ               ｃｏｍｐａｎｙ'ｓ               ｌｅｖｅｌ               ｏｆ               ｆｉｎａｎｃｉａｌ               ｒｉｓｋ.

Ｄｅｂｔ               ｒａｔｉｏ               =               ｔｏｔａｌ               ｌｉａｂｉｌｉｔｉｅｓ/ｔｏｔａｌ               ａｓｓｅｔｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｄｅｂｔ               ｒａｔｉｏ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｔｏｔａｌ               ｌｉａｂｉｌｉｔｉｅｓ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2010               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｗｈｉｃｈ               ｗｏｕｌｄ               ｂｅ               58%               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).

Ｌｏｗｅｒ               ｐｅｒｃｅｎｔａｇｅｓ               ｍｅａｎ               ｔｈａｔ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ｄｅｐｅｎｄｅｎｔ               ｌｅｓｓ               ｏｎ               ｌｅｖｅｒａｇｅ,               ｗｈｉｌｅ               ｈｉｇｈｅｒ               ｐｅｒｃｅｎｔａｇｅｓ               ｍｅａｎ               ｔｈａｔ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ｔｈｏｕｇｈｔ               ｔｏ               ｈａｖｅ               ｔａｋｅｎ               ｏｎ               ｍｏｒｅ               ｒｉｓｋ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

               Ｃｕｒｒｅｎｔ               Ｒａｔｉｏ
               Ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｍｅａｓｕｒｅｓ               ａ               ｃｏｍｐａｎｙ'ｓ               ａｂｉｌｉｔｙ               ｔｏ               ｐａｙ               ｂａｃｋ               ｓｈｏｒｔ-ｒａｎｇｅ               ｏｂｌｉｇａｔｉｏｎｓ.

Ｔｈｅ               ｍｅａｓｕｒｅｍｅｎｔ               ｏｆ               ｔｈｉｓ               ｒａｔｉｏ               ｃａｎ               ｓｉｇｎｉｆｙ               ｔｈｅ               ｅｆｆｅｃｔｉｖｅｎｅｓｓ               ａ               ｃｏｍｐａｎｙ               ｈａｓ               ｄｕｒｉｎｇ               ｉｔｓ               ｏｐｅｒａｔｉｏｎａｌ               ｃｙｃｌｅ               ａｎｄ               ｔｈｅ               ｃａｐａｂｉｌｉｔｙ               ｉｔ               ｈａｓ               ｉｎ               ｔｕｒｎｉｎｇ               ｉｔｓ               ｐｒｏｄｕｃｔｓ               ｉｎｔｏ               ｃａｓｈ.

Ｉｔ               ｉｓ               ｕｓｅｄ               ｂｙ               ｃｒｅｄｉｔｏｒｓ               ｏｒ               ｂａｎｋｓ               ｔｏ               ｓｅｅ               ｉｆ               ａ               ｃｏｍｐａｎｙ               ｃａｎ               ｒｅｃｏｍｐｅｎｓｅ               ｆｏｒ               ｑｕｉｃｋ-ｆｉｘ               ｌｏａｎｓ               ｗｉｔｈ               ｑｕｉｃｋ-ｆｉｘ               ａｓｓｅｔｓ.

Ｃｕｒｒｅｎｔ               ｒａｔｉｏ               =               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ/ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2010               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ａｎｄ               ｔｈｅ               ｔｏｔａｌ               ｗｏｕｌｄ               ｂｅ               0.9               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.

2011).

Ａ               ｃｏｍｐａｎｙ               ｉｓ               ｍｏｒｅ               ｃａｐａｂｌｅ               ｏｆ               ｐａｙｉｎｇ               ｔｈｅｉｒ               ｏｂｌｉｇａｔｉｏｎｓ               ｉｆ               ａ               ｈｉｇｈ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｉｓ               ｃａｌｃｕｌａｔｅｄ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｑｕｉｃｋ               Ｒａｔｉｏ
               Ｔｈｅ               ｑｕｉｃｋ               ｒａｔｉｏ               ｄｅｔｅｒｍｉｎｅｓ               ａ               ｃｏｍｐａｎｙ'ｓ               ｃａｐａｂｉｌｉｔｙ               ｉｎ               ｍｅｅｔｉｎｇ               ｉｔｓ               ｓｈｏｒｔ-ｒａｎｇｅ               ｏｂｌｉｇａｔｉｏｎｓ               ｗｉｔｈ               ｉｔｓ               ｏｎ               ｈａｎｄ               ａｓｓｅｔｓ.

Ｉｔ               ｄｏｅｓ               ｔｈｉｓ               ｂｙ               ｃｏｍｐａｒｉｎｇ               ａ               ｃｏｍｐａｎｙ'ｓ               ｏｎ               ｈａｎｄ               ａｓｓｅｔｓ               ｔｏ               ｉｔｓ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｉｓ               ｓｏｍｅｗｈａｔ               ｌｉｋｅ               ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｅｘｃｅｐｔ               ｉｔ               ｅｘｃｌｕｄｅｓ               ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｆｒｏｍ               ａ               ｃｏｍｐａｎｙ'ｓ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ.

Ｂｙ               ｄｏｉｎｇ               ｔｈｉｓ               ａ               ｃｏｍｐａｎｙ               ｃａｎ               ｂｅ               ｇｉｖｅｎ               ａ               ｂｅｔｔｅｒ               ｉｄｅａ               ｏｆ               ｗｈｅｒｅ               ｔｈｅｙ               ｓｔａｎｄ               ｉｎ               ｍｅｅｔｉｎｇ               ｔｈｅｉｒ               ｓｈｏｒｔ-ｒａｎｇｅ               ｏｂｌｉｇａｔｉｏｎｓ.

Ｑｕｉｃｋ               ｒａｔｉｏ               =               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ               -               ｉｎｖｅｎｔｏｒｙ/ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｑｕｉｃｋ               ｒａｔｉｏ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｃｕｒｒｅｎｔ               ａｓｓｅｔｓ,               ｓｕｂｔｒａｃｔ               ｔｈｅｉｒ               ｉｎｖｅｎｔｏｒｙ,               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｃｕｒｒｅｎｔ               ｌｉａｂｉｌｉｔｉｅｓ               ｗｈｉｃｈ               ｗｏｕｌｄ               ｔｏｔａｌ               0.8               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).

Ａ               ｃｏｍｐａｎｙ               ｉｓ               ｉｎ               ｂｅｔｔｅｒ               ｐｏｓｉｔｉｏｎ               ｔｏ               ｍｅｅｔ               ｔｈｅｉｒ               ｏｂｌｉｇａｔｉｏｎｓ               ｉｆ               ｔｈｅｉｒ               ｑｕｉｃｋ               ｒａｔｉｏ               ｉｓ               ｈｉｇｈ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｉｎｖｅｎｔｏｒｙ               Ｔｕｒｎｏｖｅｒ
               Ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｍｅａｓｕｒｅｓ               ａ               ｃｏｍｐａｎｙ'ｓ               ｅｆｆｅｃｔｉｖｅｎｅｓｓ               ｉｎ               ｓｅｌｌｉｎｇ               ｏｒ               ｒｅｐｌａｃｉｎｇ               ｔｈｅｉｒ               ｉｎｖｅｎｔｏｒｙ               ｏｖｅｒ               ａ               ｇｉｖｅｎ               ｔｉｍｅ,               ｕｓｕａｌｌｙ               ａ               ｙｅａｒ.

Ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               =               ｃｏｓｔ               ｏｆ               ｇｏｏｄｓ               ｓｏｌｄ/ｔｏｔａｌ               ｉｎｖｅｎｔｏｒｙ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｃｏｓｔ               ｏｆ               ｇｏｏｄｓ               ｓｏｌｄ               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ｔｈｅｉｒ               ｔｏｔａｌ               ｉｎｖｅｎｔｏｒｙ               ａｎｄ               ｔｈｅ               ｃａｌｃｕｌａｔｉｏｎ               ｗｏｕｌｄ               ｂｅ               ｔｈｅｙ               ａｖｅｒａｇｅ               9               ｔｉｍｅｓ               ｐｅｒ               ｙｅａｒ               ｉｎ               ｓｅｌｌｉｎｇ               ｏｒ               ｒｅｐｌａｃｉｎｇ               ｔｈｅｉｒ               ｉｎｖｅｎｔｏｒｙ               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).

Ｔｈｅ               ｈｉｇｈｅｒ               ｔｈｅ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏｓ               ｔｈｅ               ｂｅｔｔｅｒ,               ｓｉｎｃｅ               ａ               ｌｏｗ               ｉｎｖｅｎｔｏｒｙ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｗｏｕｌｄ               ｉｎｄｉｃａｔｅ               ｐｒｏｄｕｃｔｓ               ｔｅｎｄ               ｔｏ               ｄｅｔｅｒｉｏｒａｔｅ               ｉｎ               ｓｉｔｔｉｎｇ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｔｏｔａｌ               Ａｓｓｅｔ               Ｔｕｒｎｏｖｅｒ
               Ｔｈｅ               ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               ｉｓ               ａ               ｒａｔｉｏ               ｓｈｏｗｉｎｇ               ａ               ｃｏｍｐａｎｙ'ｓ               ｔｏｔａｌ               ｓａｌｅｓ               ｐｒｏｄｕｃｅｄ               ｆｏｒ               ｅａｃｈ               ｄｏｌｌａｒ'ｓ               ｗｏｒｔｈ               ｏｆ               ａｓｓｅｔｓ.

Ｉｔ               ｄｅｔｅｒｍｉｎｅｓ               ａ               ｃｏｍｐａｎｙ'ｓ               ｅｆｆｅｃｔｉｖｅｎｅｓｓ               ｉｎ               ｕｓｉｎｇ               ｔｈｅｉｒ               ａｓｓｅｔｓ               ｔｏ               ｐｒｏｄｕｃｅ               ｒｅｖｅｎｕｅ               ｏｒ               ｓａｌｅｓ.

Ａｌｓｏ,               ｔｈｉｓ               ｒａｔｉｏ               ｗｉｌｌ               ｂｅ               ｕｓｅｆｕｌ               ｆｏｒ               ｃｏｍｐａｎｉｅｓ               ｗｈｏ               ｗａｎｔ               ｔｏ               ｃｈｅｃｋ               ｔｏ               ｓｅｅ               ｉｆ               ｔｈｅｙ               ａｒｅ               ｇｅｎｅｒａｔｉｎｇ               ｒｅｖｅｎｕｅ               ｉｎ               ｐｒｏｐｏｒｔｉｏｎ               ｔｏ               ｔｈｅ               ｓａｌｅｓ               ｔｈｅｙ               ａｒｅ               ｇｅｎｅｒａｔｉｎｇ.

Ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               =               ｓａｌｅｓ/ｔｏｔａｌ               ａｓｓｅｔｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｏｔａｌ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).

Ｔａｋｅ               Ｗａｌ-Ｍａｒｔ'ｓ               ｓａｌｅｓ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2010               ａｎｄ               ｄｉｖｉｄｅ               ｉｔ               ｂｙ               ａｎｄ               ｔｈｅｉｒ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｗｈｉｃｈ               ｗｏｕｌｄ               ｔｏｔａｌ               2.39               (Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.,               2011).

Ａ               ｌｏｗ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｗｏｕｌｄ               ｉｎｄｉｃａｔｅ               ｔｈａｔ               ａ               ｃｏｍｐａｎｙ               ｈａｓ               ｈｉｇｈ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               ａｎｄ               ａ               ｈｉｇｈ               ｐｒｏｆｉｔ               ｍａｒｇｉｎ               ｗｏｕｌｄ               ｉｎｄｉｃａｔｅ               ｔｈａｔ               ａ               ｃｏｍｐａｎｙ               ｈａｓ               ｌｏｗ               ａｓｓｅｔ               ｔｕｒｎｏｖｅｒ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｐｒｉｃｅ/Ｅａｒｎｉｎｇｓ               Ｒａｔｉｏ
               Ｔｈｅ               ｐｒｉｃｅ/ｅａｒｎｉｎｇｓ               (Ｐ/Ｅ)               ｒａｔｉｏ               ｉｓ               ｔｈｅ               ｃｏｎｎｅｃｔｉｏｎ               ａｍｏｎｇ               ａ               ｃｏｍｐａｎｙ'ｓ               ｍａｒｋｅｔ               ｐｒｉｃｅ               ｏｆ               ｓｈａｒｅｄ               ｓｔｏｃｋ               ａｎｄ               ｔｈｅ               ｓｔｏｃｋ'ｓ               ｃｕｒｒｅｎｔ               ｅａｒｎｉｎｇｓ               ｐｅｒ-ｓｈａｒｅ.

Ｔｈｅ               Ｐ/Ｅ               ｒａｔｉｏ               ｉｓ               ａ               ｍｅｔｈｏｄ               ｔｈａｔ               ｉｓ               ｆｒｅｑｕｅｎｔｌｙ               ａｐｐｌｉｅｄ               ｆｏｒ               ｅｓｔａｂｌｉｓｈｉｎｇ               ｔｈｅ               ｖａｌｕｅ               ｏｆ               ｓｔｏｃｋ.

Ｉｔ               ｃａｎ               ｂｅ               ｖｉｔａｌ               ｔｏ               ｆｏｒｅｃａｓｔｅｒｓ               ｗｈｏ               ｗａｎｔ               ｔｏ               ｕｎｄｅｒｓｔａｎｄ               ｈｏｗ               ｔｈｅ               ｍａｒｋｅｔ               ｖａｌｕｅｓ               ｔｈｅ               ｓｔｏｃｋ               ｏｆ               ａ               ｐａｒｔｉｃｕｌａｒ               ｃｏｍｐａｎｙ.

Ｐ/Ｅ               ｒａｔｉｏ               =               ｍａｒｋｅｔ               ｖａｌｕｅ               ｐｅｒ               ｓｈａｒｅ/ｅａｒｎｉｎｇｓ               ｐｅｒ               ｓｈａｒｅ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               Ｐ/Ｅ               ｒａｔｉｏ.

Ｏｖｅｒａｌｌ,               ｔｈｅ               ｈｉｇｈｅｒ               ｔｈｅ               Ｐ/Ｅ               ｔｈｅ               ｂｅｔｔｅｒ               ｓｉｎｃｅ               ｔｈｉｓ               ｗｏｕｌｄ               ｉｎｄｉｃａｔｅ               ｔｈａｔ               ｉｎｖｅｓｔｏｒｓ               ｅｘｐｅｃｔ               ｆｕｔｕｒｅ               ｇｒｏｗｔｈ               ｏｆ               ｔｈｅ               ｒｅｌａｔｅｄ               ｓｔｏｃｋ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ａｃｃｏｕｎｔｓ               Ｒｅｃｅｉｖａｂｌｅ               Ｔｕｒｎｏｖｅｒ
               Ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ｔｕｒｎｏｖｅｒ               ｒａｔｉｏ               ｗｉｌｌ               ｅｓｔａｂｌｉｓｈ               ｈｏｗ               ｓｕｃｃｅｓｓｆｕｌ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ｉｎ               ｇｉｖｉｎｇ               ｃｒｅｄｉｔ               ａｓ               ｗｅｌｌ               ａｓ               ｇａｔｈｅｒｉｎｇ               ｄｅｂｔｓ               ｏｗｅｄ               ｔｏ               ｔｈｅｍ.

Ｄｕｒｉｎｇ               ａｎ               ａｃｃｏｕｎｔｉｎｇ               ｐｅｒｉｏｄ               ｔｈｅ               ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ｔｕｒｎｏｖｅｒ               ｗｉｌｌ               ｍｅａｓｕｒｅ               ｔｈｅ               ｎｕｍｂｅｒ               ｏｆ               ｔｉｍｅｓ               ａ               ｃｏｍｐａｎｙ               ｃｏｎｖｅｎｔｓ               ｔｈｅｉｒ               ｃｒｅｄｉｔ               ｓａｌｅｓ               ｉｎｔｏ               ｃａｓｈ.

Ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ｔｕｒｎｏｖｅｒ               =               ｃｒｅｄｉｔ               ｓａｌｅｓ/ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ａｃｃｏｕｎｔｓ               ｒｅｃｅｉｖａｂｌｅ               ｔｕｒｎｏｖｅｒ.

Ａ               ｈｉｇｈ               ｔｕｒｎｏｖｅｒ               ｉｎｄｉｃａｔｅｓ               ｃｒｅｄｉｔ               ｉｓ               ｇｒａｎｔｅｄ               ｅｆｆｅｃｔｉｖｅｌｙ               ａｎｄ               ｐａｙｍｅｎｔ               ｒｅｃｅｉｖｉｎｇ               ｆｒｏｍ               ｃｕｓｔｏｍｅｒｓ               ｉｓ               ｅｆｆｅｃｔｉｖｅ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｏｐｅｒａｔｉｎｇ               Ｒａｔｉｏｓ
               Ｔｈｅ               ｏｐｅｒａｔｉｎｇ               ｒａｔｉｏ               ｉｓ               ａｎｏｔｈｅｒ               ｍｅｔｈｏｄ               ｆｏｒ               ａｎａｌｙｚｉｎｇ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ.

Ｔｈｉｓ               ｒａｔｉｏ               ｗｉｌｌ               ｃｏｍｐａｒｅ               ｔｈｅ               ｏｐｅｒａｔｉｎｇ               ｅｘｐｅｎｓｅｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ               ｔｏ               ｔｈｅｉｒ               ｎｅｔ               ｓａｌｅｓ.

Ｂｙ               ｃｏｍｐａｒｉｎｇ               ｔｈｅ               ｏｐｅｒａｔｉｎｇ               ｅｘｐｅｎｓｅｓ               ｔｏ               ｎｅｔ               ｓａｌｅｓ               ｍａｎａｇｅｍｅｎｔ               ｗｉｌｌ               ｂｅ               ｇｉｖｅｎ               ｉｎｆｏｒｍａｔｉｏｎ               ｔｈａｔ               ｉｓ               ｎｅｅｄｅｄ               ｔｏ               ｍａｋｅ               ｂｅｔｔｅｒ               ｄｅｃｉｓｉｏｎｓ               ｒｅｇａｒｄｉｎｇ               ｔｈｅ               ｏｐｅｒａｔｉｏｎｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｏｐｅｒａｔｉｎｇ               ｒａｔｉｏ               =               ｏｐｅｒａｔｉｎｇ               ｅｘｐｅｎｓｅ/ｎｅｔ               ｓａｌｅｓ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｏｐｅｒａｔｉｎｇ               ｒａｔｉｏ.

Ａ               ｌｏｗ               ｏｐｅｒａｔｉｎｇ               ｒａｔｉｏ               ｉｓ               ｔｈｏｕｇｈｔ               ｔｏ               ｂｅ               ｉｄｅａｌ,               ｂｅｃａｕｓｅ               ｗｉｔｈ               ａ               ｌｏｗ               ｏｐｅｒａｔｉｎｇ               ｒａｔｉｏ               ａ               ｃｏｍｐａｎｙ               ｗｉｌｌ               ｒｅｍａｉｎ               ｐｒｏｆｉｔａｂｌｅ               ｉｎ               ｔｈｅ               ｅｖｅｎｔ               ｏｆ               ａ               ｄｅｃｌｉｎｅ               ｉｎ               ｒｅｖｅｎｕｅ               (Ｉｎｖｅｓｔｏｐｅｄｉａ,               2010).
               Ｃｏｍｍｏｎ               Ｓｉｚｅ               Ｒａｔｉｏｓ
               Ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏｓ               ａｒｅ               ａｎｏｔｈｅｒ               ｍｅｔｈｏｄ               ｆｏｒ               ａｎａｌｙｚｉｎｇ               ｔｈｅ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏｓ               ｅｖａｌｕａｔｅ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｓｔａｔｅｍｅｎｔｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ               ｏｖｅｒ               ｄｉｆｆｅｒｅｎｔ               ｔｉｍｅ               ｐｅｒｉｏｄｓ.

Ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏ               =               ｉｔｅｍ               ｏｆ               ｉｎｔｅｒｅｓｔ/ｒｅｆｅｒｅｎｃｅ               ｉｔｅｍ               ｉｓ               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏｓ               (Ｇａｒｒｉｓｏｎ,               Ｎｏｒｅｅｎ,               &               Ｂｒｅｗｅｒ,               2010).

Ｆｏｒ               ｉｎｓｔａｎｃｅ,               ｌｅｔ'ｓ               ｓａｙ               ｔｈａｔ               ｔｈｅ               ｃｏｍｐａｎｙ               ｗａｎｔｅｄ               ｔｏ               ｃｏｍｐａｒｅ               ｉｎｖｅｎｔｏｒｙ               ａｇａｉｎｓｔ               ｔｏｔａｌ               ａｓｓｅｔｓ,               ｔｈｅ               ｍｅｔｈｏｄ               ｆｏｒ               ｃａｌｃｕｌａｔｉｎｇ               ｔｈｉｓ               ｗｏｕｌｄ               ｂｅ               ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏ               =               ｉｎｖｅｎｔｏｒｙ/ｔｏｔａｌ               ａｓｓｅｔｓ.

Ｃｏｍｐａｒｉｎｇ               ｉｎｖｅｎｔｏｒｙ               ｗｉｔｈｉｎ               ｅａｃｈ               ｄｅｐａｒｔｍｅｎｔ               ａｇａｉｎｓｔ               ｔｏｔａｌ               ａｓｓｅｔｓ               ｃａｎ               ｒｅｖｅａｌ               ｔｒｅｎｄｓ               ａｎｄ               ｐｒｏｖｉｄｅ               ｉｎｓｉｇｈｔ               ｔｏ               ｄｉｆｆｅｒｅｎｔ               ｏｐｅｒａｔｉｏｎａｌ               ａｃｔｉｖｉｔｉｅｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｃｏｍｍｏｎ               ｓｉｚｅ               ｒａｔｉｏｓ               ａｒｅ               ｇｅｎｅｒａｌｌｙ               ｐｒｅｐａｒｅｄ               ｆｒｏｍ               ｔｈｅ               ｂａｌａｎｃｅ               ｓｈｅｅｔ               ａｎｄ               ｉｎｃｏｍｅ               ｓｔａｔｅｍｅｎｔ               ａｎｄ               ｔｈｅｙ               ａｒｅ               ｅｘｐｒｅｓｓｅｄ               ａｓ               ａ               ｐｅｒｃｅｎｔａｇｅ               (Ｃｏｍｍｏｎ               Ｓｉｚｅ               Ｆｉｎａｎｃｉａｌ               Ｓｔａｔｅｍｅｎｔｓ,               2010).
               Ｃｏｎｃｌｕｓｉｏｎ
               Ｔｈｅｒｅ               ａｒｅ               ｍａｎｙ               ｗａｙｓ               ｔｏ               ａｎａｌｙｚｅ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｏｎｃｅ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ａ               ｃｏｍｐａｎｙ               ｉｓ               ａｎａｌｙｚｅｄ               ｄｅｃｉｓｉｏｎｓ               ｃａｎ               ｔｈｅｎ               ｂｅ               ｍａｄｅ               ｂｙ               ｍａｎａｇｅｍｅｎｔ               ｒｅｇａｒｄｉｎｇ               ｄｉｆｆｅｒｅｎｔ               ａｒｅａｓ               ｏｆ               ａ               ｃｏｍｐａｎｙ.

Ｇｉｖｅｎ               ｔｈｅ               ｊｏｕｒｎａｌ               ｅｎｔｒｉｅｓ               ｆｏｒ               2005               ｆｏｒ               ＥＥＣ               Ｉ               ｗｉｌｌ               ａｔｔｅｍｐｔ               ｔｏ               ａｓｓｅｓｓ               ｔｈｅ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ｔｈｅ               ｃｏｍｐａｎｙ               ｕｓｉｎｇ               ｔｗｏ               ｏｆ               ｔｈｅ               ｒａｔｉｏｓ               ｍｅｎｔｉｏｎｅｄ.

Ｃａｌｃｕｌａｔｉｎｇ               ｔｈｅ               ｃｕｒｒｅｎｔ               ｒａｔｉｏ               ｏｆ               ＥＥＣ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2005               ａｓ               ｂｅｉｎｇ               ｒｉｇｈｔ               ａｂｏｕｔ               3.22               ｗｏｕｌｄ               ｔｅｌｌ               ｍｅ               ｔｈａｔ               ｗｅ               ａｒｅ               ｉｎ               ｇｏｏｄ               ｆｉｎａｎｃｉａｌ               ｈｅａｌｔｈ               ａｎｄ               ａｒｅ               ａｂｌｅ               ｔｏ               ｍａｉｎｔａｉｎ               ｆｉｎａｎｃｉａｌ               ｒｅｓｐｏｎｓｉｂｌｙ               ｔｏ               ｐａｙ               ｂａｃｋ               ｌｏａｎｓ               ｉｆ               ｎｅｅｄｅｄ.

Ｔｈｅ               ｃａｌｃｕｌａｔｉｏｎ               ｆｏｒ               ｔｈｅ               Ｄ/Ｅ               ｒａｔｉｏ               ｆｏｒ               ｔｈｅ               ｙｅａｒ               2005               ｉｓ               .45               ｗｈｉｃｈ               ｉｓ               ａｃｃｅｐｔａｂｌｅ               ｉｎ               ｔｈａｔ               ｉｔ               ｔｅｌｌｓ               ｍｅ               ｗｅ               ａｒｅ               ｎｏｔ               ｈａｖｉｎｇ               ｅｘｃｅｓｓｉｖｅｎｅｓｓ               ｉｎ               ｏｕｒ               ｄｅｂｔ               ｔｏ               ｅｑｕｉｔｙ               ｆｏｒ               ｔｈｉｓ               ｐｅｒｉｏｄ.

Ｔｈｅｓｅ               ａｒｅ               ｊｕｓｔ               ａ               ｃｏｕｐｌｅ               ｏｆ               ｔｈｅ               ｒａｔｉｏｓ               ｔｈａｔ               ｃａｎ               ｂｅ               ｕｓｅｄ               ｔｏ               ａｓｓｅｓｓ               ｔｈｅ               ｆｉｎａｎｃｉａｌ               ｐｅｒｆｏｒｍａｎｃｅ               ｏｆ               ｔｈｅ               ｃｏｍｐａｎｙ,               ｏｎｃｅ               ｔｈｅ               ｐｅｒｆｏｒｍａｎｃｅ               ｉｓ               ａｓｓｅｓｓｅｄ               ｉｎ               ａｌｌ               ａｒｅａｓ               ｔｈｅ               ｒｏａｄ               ｔｏ               ｆｉｎａｎｃｉａｌ               ｓｕｃｃｅｓｓ               ｉｓ               ｎｅａｒ.

               Ｒｅｆｅｒｅｎｃｅｓ
               Ｃｏｍｍｏｎ               Ｓｉｚｅ               Ｆｉｎａｎｃｉａｌ               Ｓｔａｔｅｍｅｎｔｓ.

(2010).

Ｒｅｔｒｉｅｖｅｄ               ｆｒｏｍ               ｈｔｔｐ://ｗｗｗ.ｎｅｔｍｂａ.ｃｏｍ/ｆｉｎａｎｃｅ/ｓｔａｔｅｍｅｎｔｓ/ｃｏｍｍｏｎ-ｓｉｚｅ/
               Ｇａｒｒｉｓｏｎ,               Ｒ.,               Ｎｏｒｅｅｎ,               Ｅ.,               &               Ｂｒｅｗｅｒ,               Ｐ.

(2010).

Ｍａｎａｇｅｒｉａｌ               ａｃｃｏｕｎｔｉｎｇ,               (13ｔｈ               ｅｄ.).

Ｎｅｗ               Ｙｏｒｋ,               ＮＹ:               ＭｃＧｒａｗ-Ｈｉｌｌ               Ｉｒｗｉｎ.
               Ｉｎｖｅｓｔｉｎｇ               Ａｎｓｗｅｒｓ.

(2011).

Ｄｅｂｔ-ｔｏ-Ｅｑｕｉｔｙ               Ｒａｔｉｏ.

Ｒｅｔｒｉｅｖｅｄ               ｆｒｏｍ               ｈｔｔｐ://ｗｗｗ.ｉｎｖｅｓｔｉｎｇａｎｓｗｅｒｓ.ｃｏｍ/ｔｅｒｍ/ｄｅｂｔ-ｅｑｕｉｔｙ-ｒａｔｉｏ-358
               Ｉｎｖｅｓｔｏｐｅｄｉａ.

(2010).

Ｄｉｃｔｉｏｎａｒｙ.

Ｒｅｔｒｉｅｖｅｄ               ｆｒｏｍ               ｈｔｔｐ://ｗｗｗ.ｉｎｖｅｓｔｏｐｅｄｉａ.ｃｏｍ/ｄｉｃｔｉｏｎａｒｙ/
               Ｍｏｔｌｅｙ               Ｆｏｏｌ               Ｓｔａｆｆ.

(2011).

Ｒｅｔｕｒｎ               ｏｎ               ｅｑｕｉｔｙ:               Ａｎ               ｉｎｔｒｏｄｕｃｔｉｏｎ.

Ｒｅｔｒｉｅｖｅｄ               ｆｒｏｍ               ｈｔｔｐ://ｗｗｗ.ｆｏｏｌ.ｃｏｍ/ｉｎｖｅｓｔｉｎｇ/ｂｅｇｉｎｎｉｎｇ/ｒｅｔｕｒｎ-ｏｎ-ｅｑｕｉｔｙ-ａｎ-ｉｎｔｒｏｄｕｃｔｉｏｎ.ａｓｐｘ
               Ｗａｌ-Ｍａｒｔ               Ｓｔｏｒｅｓ               Ｉｎｃ.

(2011).

Ｒｅｔｒｉｅｖｅｄ               ｆｒｏｍ               ｈｔｔｐ://ｆｉｎａｎｃｅ.ｙａｈｏｏ.ｃｏｍ/ｑ/ｂｓ?ｓ=ＷＭＴ+Ｂａｌａｎｃｅ+Ｓｈｅｅｔ&ａｎｎｕａｌ

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