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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acceptable debt to equity ratio Video 3
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