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PART B ELEMENTS IN CURRENT ASSETS

LIQUIDITY RATIO FORMULA REMARKS EVALUATION Cash
Current Ratio Current Assets is better firm has a higher Cheque/Bank Draf
(CR) Current Liabilities ability to meet Other Negotiable Instruments
short-term obligation Account Recevable
* times Marketable Securities
Quick Ratio Current Assets - Inventory is better firm has a higher Deposit
(QR) / Acid Ratio Current Liabilities ability to pay w/out Inventories
having to rely on Prepaid Expenses
* times illiquid CA Prepayment
Net Working Capital Current Assets-Current Liabilities < 0 payment obligation
(NWC) the amount of fixed
assets are financed
* RM with CL
ELEMENTS IN FIXED ASSETS
PART B Land
ACTIVITY / ASSET MANAGEMENT RATIO FORMULA REMARKS EVALUATION Buiding
Inventory Turnover COGS or **Sales is better firm is effectively using Motor vehicles
(ITO) / Inventory Utilization Ratio Inventory its inventory to generate Equipments
sales Plant
*times ** Patern
Average Collection Period Account Receivable x 360 is better firm is good in managing ** Goodwill
(ACP) Credit Sales or ** Sales its credit sales & more
cash in hands
* days
Fixed Assets Turnover Sales is better Firm is able to utilize ELEMENTS IN FIXED EQUITIES
(FATO) Net Fixed Assets its fixed assets & good Retained Earnings
in managing its assets Paid In Capital / Premium
* times Common Shares
Total Assets Turnover Sales is better Firm is able to utilize Preferred Shares
(TATO) Total Assets its overall assets & good Shareholders' Equity
in managing its assets
* times
Prepared By: Nur Liyana Mohamed Yousop
PART A
CHAPTER 2: FINANCIAL RATIO AND ANALYSIS
PART A
PART B ELEMENTS IN CURRENT LIABILITIES
PROFITABILITY RATIO FORMULA REMARKS EVALUATION Account Payable
Gross Profit Margin Gross Profit is better firm is able to control Tax Payable
(GPM) Sales COGS relative to its Tax Accrual
sales revenue Acrrued Expemses
* % Short Term Debt
Operating Profit Margin Earning Before Interest & Taxes is better firm is able to provide Accounts Liabilities
(OPM) Sales more return because ** Notes Payable
the firm is productively
* % manage its assets
Return On Equity Earning After Taxes is better firm is able to maximize
(ROE) Total Equity the owner's wealth ELEMENTS IN LONG TERM LIABILITIES
Long Term Debt
* % Mortgage
Return On Assets Earning After Taxes is better firm is able to control Bonds
(ROA) / Return On Total Assets costs in its operation Leases
Investment (ROI) (assets are productive) Debentures
* % and provide more return
Net Profit Margin Earning After Taxes is better firm has a better growth
(NPM) Sales prospect & able to
generate net earnings to NOTES
* % s/holders(earn > ringgit)
PART B
DEBT / LEVERAGE RATIO FORMULA REMARKS EVALUATION
Debt Ratio Total Liabilities is better firm is good in
(DR) Total Assets managing its debt
& low financial risk
* %
Debt to Equity Ratio Long Term Liabilities <1 more funds provided
(DER) Equity by owners.
* times
Times Interest Earning Before Interest & Taxes is better firm is good in
Earned (TIE) Interest meeting their
interest payment
* times obligation
Prepared By: Nur Liyana Mohamed Yousop
PART A
PART A