Sections
Horizontal Analysis
Vertical Analysis
Common-sized Statements
Trend Percentages
Discontinued Operations and Extraordinary Items
Introduction to Ratios
Ratios: Earnings Per Share (EPS)
Ratios: Working Capital and the Current Ratio
Ratios: Quick (Acid Test) Ratio
Ratios: Gross Profit Rate
Ratios: Profit Margin
Ratios: Quality of Earnings Ratio
Ratios: Inventory Turnover
Ratios: Average Days in Inventory
Ratios: Accounts Receivable (AR) Turnover
Ratios: Average Collection Period (Days Sales Outstanding)
Ratios: Return on Assets (ROA)
Ratios: Total Asset Turnover
Ratios: Fixed Asset Turnover
Ratios: Profit Margin x Asset Turnover = Return On Assets
Ratios: Accounts Payable Turnover
Ratios: Days Payable Outstanding (DPO)
Ratios: Times Interest Earned (TIE)
Ratios: Debt to Asset Ratio
Ratios: Debt to Equity Ratio
Ratios: Payout Ratio
Ratios: Dividend Yield Ratio
Ratios: Return on Equity (ROE)
Ratios: DuPont Model for Return on Equity (ROE)
Ratios: Free Cash Flow
Ratios: Price-Earnings Ratio (PE Ratio)
Ratios: Book Value per Share of Common Stock
Ratios: Cash to Monthly Cash Expenses
Ratios: Cash Return on Assets
Ratios: Economic Return from Investing
Ratios: Capital Acquisition Ratio
Additional Practice
Ratios Cumulative Problems

Concept #1: Ratios: Working Capital and the Current Ratio

Practice: The following table contains selected financial information for Tougher Question, Inc.

Calculate the current ratio and working capital for TQ, Inc.

Additional Problems
The current ratio is a. calculated by dividing current liabilities by current assets. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current liabilities from current assets.
Current assets are $400,000 of the total assets of $1,000,000. Current liabilities are $200,000 of the total liabilities of $700,000. What is the current ratio? A) 2.00 B) 2.50 C) 1.43 D) 1,75
All other things being equal, which of the following would  decrease the current ratio? a. A fixed asset is sold for more than book value. b. The estimated taxes payable are increased. c. Accounts receivable are collected. d. Cash is acquired through issuance of additional common stock. e. Ten-year notes are issued to pay off accounts payable.
Listed below are the account balances of the Frank Corporation on December 31, 2014. What is Frank’s current ratio: A. 1.077. B. 0.929. C. 1.190. D. 0.933.
Charity Kemper analyzes a company's current ratio before deciding whether to invest in the company. What types of information does Charity hope to gleam by analyzing the current ratio? a. The company's proportion of current to long-term liabilities. b. The company's proportion of current to long-term assets. c. The company's proportion of assets that is financed with debt. d. The company's ability to pay current liabilities with current assets.
What was Eric's working capital as of 12/31/12? a. $9,410 b. $12,360 c. $9,160 d. $11,160
Which of the following accounts would be part of working capital? A. accounts payable B. land C. supplies D. retained earnings E. cost of goods sold F. two of the above accounts are part of working capital G. three of the above accounts are part of working capital H. four of the above accounts are part of working capital I. all of the above accounts are part of working capital
From a liquidity standpoint, it is more desirable for a company to have current a. assets equal current liabilities. b. liabilities exceed current assets. c. assets exceed current liabilities. d. liabilities exceed long-term liabilities.
What is the current ratio for this company? a. 1.42 b. 0.80 c. 1.16 d. 0.60
Sheffield's Furniture has $1,292,000 in current assets and $580,000 in current liabilities.  Its initial inventory level is $620,000, and it will raise funds as additional notes payable and use them to increase inventory.  How much can its short-term debt (notes payable) increase without pushing its current ratio below 1.9? a. $477,778 b. $100,000 c. $190,000 d. $211,111 e. $226,316
All other things being equal, which of the following would decrease the current ratio? a. Equipment is purchased with short-term notes. b. A fixed asset is sold for more than book value. c. Cash is acquired through issuance of additional common stock. d. Short-term promissory notes are issued to trade creditors in exchange for past-due accounts payable. e. Ten-year notes are issued to pay off accounts payable.
Sheffield's Furniture has $1,386,500 in current assets and $635,000 in current liabilities.  Its initial inventory level is $460,000, and it will raise funds as additional notes payable and use them to increase inventory.  How much can its short-term debt (notes payable) increase without pushing its current ratio below 1.9? a. $94,737 b. $180,000 c. $311,111 d. $200,000 e. $147,368
A company has a current ratio of 2.4 before purchasing a piece of equipment with cash. Following this payment the current ratio will be: a. less than 2.4 b. greater than 2.4 or less than 2.4 depending upon the dollar amount involved c. greater than 2.4 d. equal to 2.4