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What is effect on current ratio if inventory is sold for profit?
When inventory is sold for profit, the current ratio typically improves. This is because the sale increases current assets (cash or accounts receivable) while decreasing current assets (inventory) by the same amount. However, if the sale generates a profit, it also increases retained earnings in equity, potentially enhancing the overall financial health of the company. As a result, the current ratio may reflect a more favorable position.
What is turnover ratio?
Percentage of people that leave on a regular basis
What is cash coverage ratio?
The cash coverage ratio is useful for determining the amount of cash available to pay for interest, and is expressed as a ratio of the cash available to the amount of interest to be paid.To calculate the cash coverage ratio, take the earnings before interest and taxes (EBIT) from the income statement, add back to it all non-cash expenses included in EBIT (such as depreciation and amortization), and divide by the interest expense. The formula is: Earnings Before Interest and Taxes + Non-Cash Expenses Interest Expense.
The times interest earned ratio is calculated by dividing Bonds Payable by Interest Expense?
The times interest earned (TIE) ratio is actually calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense, not by dividing bonds payable by interest expense. This ratio measures a company's ability to meet its interest obligations, indicating how many times it can cover its interest payments with its earnings. A higher TIE ratio suggests greater financial stability and a lower risk of default.
How do you calculate a profit margin ratio?
Profit Margin ratio is the comparison of profit as a percentage of revenue and calculated as follows Profit Margin ratio = Net Profit/Revenue
What is R E ratio?
The R/E ratio, or "retention ratio," is a financial metric that indicates the percentage of a company's earnings that is retained (not paid out as dividends) and reinvested back into the company for growth. It is calculated as (1 - dividend payout ratio) and can help investors assess how much of a company's profits are being plowed back into the business. A high R/E ratio suggests strong growth potential, while a low ratio may indicate that the company is distributing most of its profits to shareholders.
What is the pros and cons of constant payout ratio policy?
A constant payout ratio policy ensures that a fixed percentage of earnings is distributed as dividends, providing a predictable income stream for shareholders. The pros include consistent returns for investors and a clear signal of financial health. However, the cons include potential volatility in dividend payments, especially during earnings fluctuations, and the possibility of limiting retained earnings needed for reinvestment in growth opportunities. This policy may also discourage investment during downturns if dividends are prioritized over company stability.
What is an example of a market prospects ratio?
Price earnings ratio.
What is cost ratio calculated by?
Cost Ratio = expenses/earnings
How to find the price earnings ratio of a company?
To find the price-earnings ratio of a company, divide the current stock price by the earnings per share. This ratio helps investors assess the company's valuation and growth potential.
How can one find the price to earnings ratio of a company?
To find the price to earnings ratio of a company, divide the current stock price by the earnings per share. This ratio helps investors assess the company's valuation and growth potential.
How can one determine the dividend payout ratio of a company?
To determine the dividend payout ratio of a company, you divide the total dividends paid out to shareholders by the company's net income. This ratio shows what percentage of the company's earnings are being distributed to shareholders as dividends.
What is a bankruptcy predictor?
Dept / earnings ratio.
What is the pe ratio of a business?
Is the Price/Earnings ratio. You can find it by taking the market price per share and dividing it by the annual earnings per share.
What is Basic Earnings Power Ratio?
The basic earning power ratio (or BEP ratio) compares earnings apart from the influence of taxes or financial leverage, to the assets of the company. It is just a ratio of the earnings of the company and its assets and does not include the capital invested into the company or the tax and interest liabilities.Formula:BEPR = EBIT / Total Assets
What affect does earnings per share have on price earnings ratio?
the price earnings ratio is simply earnings-per-share divided by the share price. OOPS! I got that upside down! It is the share price divided by the earnings per share. The earnings figure might be for the trailing twelve months (ttm) or earnings estimated for the next four quarters.
WHAT IS THE fixed pay-out ratio policy?
A fixed payout ratio policy is a corporate strategy where a company commits to distributing a predetermined percentage of its earnings as dividends to shareholders. This approach provides investors with a reliable expectation of dividend income, regardless of fluctuations in the company’s profits. By maintaining a consistent payout ratio, companies can signal financial stability and confidence in their future earnings. However, this policy may limit a company's flexibility to reinvest profits during periods of lower earnings.
