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It tells about the capital structure of the company-how much it is debt financed and how much owner's equity is there.
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∙ 11y ago
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Tell us three ratios used to judge a company?
Return on equity, Net Profitability ratio, Acid Test
How debt equity ratio improved?
Since the debt/equity ratio is determined as a fraction, you either decrease debt or increase equity. Before 2008, home equity increased yearly, but middle class persons kept borrowing against the equity rather than let it increase. Many mortgages are now underwater - the value of the house is less than the mortgage(s). So increasing equity is difficult. Debt can be improved by 1)discharging debt in bankruptcy, 2) paying down credit cards, 3)never going over credit limits, preferably staying under half of the credit limit and paying the balance due at the end of the period (not the minimum payment due, the full balance). If you have more than one card, you might want to try paying down one card completely. Picking which card to do that to can get complicated, so you might consult a US Trustee approved debt consultation agency.
What is the debt-equity ratio of a company with a weighted average cost of capital of 13 percent a cost of equity of 16.5 percent and a pretax cost of debt of 7 percent with a tax rate of 31 percent?
Company is leaveraged with 30% debt i.e. gearing will be 30% however only managed to form one constraint in the absence of further information. Net cost of debt = 0.07 * (1 - 0.31) = 4.83% Cost of equity = 16.5% WACC = 13% Let Ke be the equity mix and Kd the debt mix (assuming total is 1) So what mix of debt and equity should give us 13% i.e. 16.5Ke + 4.83Kd = 13 Also Ke > 0, Kd > 0 & Ke + Kd = 1 If you plug in 0.70 and 0.30 in above you will get 13
What us the differences between debt and equity capital?
Equity capital is the form of finance which is provided by owners of the business while debt financing is form of long term loan which requires to pay interest. Debt financing has the benefit that interest paid for that is tax deductable while equity capital don't have to pay any interest and that's why it is not a tax deductable so for this type of benefit of debt finance companies tries to maintain proper mix of debt as well as equity capital in the business.
What are debt funds?
Debt mutual funds are like Equity mutual funds with one main difference. Equity mutual funds buy shares whereas Debt mutual funds buy bonds and other debt products. So the returns on investment would be similar to what a bank would give us.
What is the average bad debt ratio for US Companies that issue credit?
0.07%
What are debt mutual funds?
Debt mutual funds are like Equity mutual funds with one main difference. Equity mutual funds buy shares whereas Debt mutual funds buy bonds and other debt products. So the returns on investment would be similar to what a bank would give us.
What reasons that can influence the Return on equity?
if we break down the ROE ratio, you can be able to identify the smaller components of the ROE ratio. Then it will remind us that te return on financial firms shareholders is highly sensitive. For example, if a financial insitution have a low ROA, the insitution can still achieve a high ROE. That can only be achieved if the organization rely heavily on debt.
Where can I find a free debt to income ratio calculator?
Most of us are no longer clueless about how important high credit scores or FICO scores are, but what is our debt to income ratio? Go to "http://www.usnews.com/usnews/biztech/tools/modebtratio.htm" and plug in your numbers to see how low (the lower, the better) your ratio is!
Can you use a home equity loan on a current property originally taken out for remodeling for a down payment on a new property?
You should ask your banker or mortgage lender if you can do that. If your debt to income ratio is to high you will be declined for a loan. I know with our money we were better off paying our car loans that got us a better interest rate then putting down a down payment and having debt we would have had a bigger interest rate. Now, if your other house is paid down enough where you will still come out ahead after paying back the home equity then it probably wouldn't matter.
Why reluctance is dependet on magnetic flux?
It isn't. However, the ratio of magnetomotive force to magnetic flux will tell you what the reluctance happens to be for that particular ratio, in exactly the same way that resistance isn't dependent on current, but the ratio of voltage to current will tell us what the resistance happens to be for that particular ratio.
What are three ways the value of a common stock can change?
You can quickly evaluate using 4 key metrics: The price to earnings ratio The first and most important number is the price to earnings ratio. It tells us how much a company is earning in profits compared to the company’s price. Let’s make a simple calculation using Apple as an example: If the price of one stock is $180, then we divide that by the earnings per share. This just means how much profit they earned in the past year but for one share of that company. So, if they made 50 million a year but had five million stocks, that’s ten dollars earned for one share. 180 divided by an earnings per share of 10 is 18. A p/e ratio of 18 means apples price is 18 times what they earned in profits. They have a price of $180 per piece of Apple and each piece made ten dollars last year. So, the price is eighteen times what they made in profits. The price to sales ratio Instead of comparing the price to the earnings of a company, we compare it to the revenue. Revenue is money made before any expenses. For example, an iPhone costs you $1,000. That’s the revenue. But Apple only keeps $500 after the costs of making that iPhone. 500 is the earnings or profit. To get this ratio, we can use Apple as an example: The first part is the price of 180 divided by their revenue per share which is 50 per share. We get 3.6. Apple made $1 before any costs for every three dollars and six cents we paid. The average p.s ratio is 2.2 right now. The price-to-book ratio The price-to-book ratio compares the price of a stock to how much equity per share they have. Equity is pure money they have after debts are paid off. Like the previous ratios, we divide that number by the number of shares. For Apple at $180, dividing by their book value of 25 and we get a price to book ratio of 7.2. This means they have one dollar for every seven dollars in two cents we paid for them. The debt to equity ratio The last ratio we can use for a quick valuation is the debt to equity ratio which tells us how much debt a company has. We’re combining a company’s short and long-term debt and comparing it to the equity which is money after debts are paid. Apple has 122 billion of debt and 134 billion of equity. Dividing 122 by 134, we have a ratio of 0.9. You want this number to be low so a company has less debts. Below one is a good ratio. Credit: buyingforselling. com
