Financial Ratio Paper

Aspire’s Quick Ratio below the industry average for year 1999-2000. The company appears to have higher risk than that of the industry. The current ratio and the quick ratio are below the industry average for year 1999- 2000. Thus, the company would have difficulty covering its obligations when compared to other companies within the same industry.

Liquidity is important for any firm as it is an assessment of the ability to pay its' liabilities in the short term. There are two main liquidity ratios: the current and the quick ratio. The current ratios divides the current assets by the current liabilities to assess how many times the current assets can pay the current liabilities (Elliott and Elliott, 2011). Traditional ratios are usually in the region of 1.5, but this may vary depending on the industry and nature of the business (Elliott and Elliott, 2011). The current ratio is shown in table 1.

Current Ratio: Current ratio measures the capability of the company in paying current liability. Higher the current ratio, better the liquidity position of the company. Generally, a current

The Current Ratio is used to identify whether or not a company can pay its current obligations.

Current ratio shows how well the company can pay off its short-term liability obligations. Short-term liabilities are debt due within the next year. Companies that have larger amounts of current assets are better able to pay off their current liabilities. The higher the ratio, the better able the company is to pay current obligations. A low ratio indicates the company is weighted down with current debt and the cash flow will suffer. The equation for current ratio

VIII. Earnings per Share (EPS) is used by analysts and potential investors to evaluate the profitability of a company.

Current ratio is type of liquidity ratio. It is a financial tool used to measure a company’s ability to pay off its short-term debts with its short-term assets. A company’s current ratio is expressed by dividing its current assets by its current liabilities. A higher current ratio means the company is more capable of paying off its debts. If the current ratio is under one, this suggests the company is unable to pay off its obligations if they were due at that point (Investopedia, 2013). Companies that have trouble collecting money for its receivables or have long inventory turnovers can run into liquidity problems because they are unable to lessen their obligations.

Current ratio is a liquidity ratio that measures a business’s ability to pay short term liabilities with their current assets. The formula for current ratio is : Current Assets / current liabilities

One is Working capital to total assets ratio that measures a firm’s ability to pay off its short-term liabilities and is calculated by subtracting current liabilities from current assets divided by total assets. The retained earnings to total assets ratio that measures a firm’s use of its total asset base to generate earnings is also used. It is important to note that retained earnings can be easily manipulated distorting the final calculation. The third financial ratio used by the Z score formula is the market value of equity to book value of debt. This is the inverse of the debt to equity ratio, and it shows the amount a firm’s assets can decline in value before liabilities exceed assets. For closely held firms, stockholders’ equity or total assets less total liabilities can be used but this amount has not been statistically verified for purposes of the formula. The sale to total assets ratio that measures a firm’s ability to generate sales with its asset base is also used. The fifth financial ratio is the operating income to total assets. This ratio is the most important factor in the formula because its profit that eventually makes or breaks a firm. In calculating the Z score, each of these ratios is given a weight factor that is used within the formula. (IOMA’s report, 2003). See appendix I for the Z score formula and how to interpret the results obtained. The Z score is used by firms when running regular financial data and firms use it to spot

Importance: The quick ratio measures the liquidity of a company by showing its capacity to pay off its financial commitment with quick assets.

The Quick Ratio also known as Acid Ratio is used by firms to determine liquidity position. It explains if the firm is able to pay all of their current debt liabilities. (Dyson, 2010) The graph above illustrates that over the period from 2007 to 2011 quick ratio was not more that 1, which means that their debts might not be covered all. The graph also indicates that a peak was in 2011.

Current Ratio is the measure of short-term liquidity. It indicates that the ability of an entity to meet its

The definition of Earnings per share is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.

Current Ratio is the relationship between a company’s current assets and current liabilities. This form of liquidity ratio also shows if the company can pay its current liabilities. A company’s current ratio can be formulated by dividing the current assets by the current liabilities. In 2016, Starbucks had a ratio of 1.05, which shows that the company has 5% cash and assets that could cover all current liabilities, thus it should not have any problems paying its current liabilities.

To measure the Exelon’s bottom line you must have knowledge of their financial strength. The Quick Ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. It measures the dollar amount of liquid assets available for each dollar of current liabilities. The