Surname 1Name:Tutor:Course:DateRephrasing Answers3-1a.The ratio indicating the relationship between a firms cash among other current assets with itscurrent liabilities is known as a liquidity ratio. To arrive ta this ratio, the value of currentassets is divided by that of current liabilities. It signifies the coverage level of currentliabilities by such assets anticipated to undergo an imminent cash conversion. The acid, orquick rest, ratio is arrived at by having the current assets less inventories divided by thecurrent liabilities.b. Asset management ratios have been described as a set of ratios indicating how efficientlyfirm assets are managed. COGS divided by the inventories gives rise to the inventoryturnover ratio. The accounts receivable are evaluated using the DSO (Days SalesOutstanding) and this signifies the firms wait period to receive cash upon making a sale.This is arrived at by having the receivables divided by average daily sales. The efficacy of thefirms plant and equipment use is measured using the fixed assets turnover ratio. This isnormally the sales to net fixed assets ratio. The firms assets turnover is measured using thetotal assets turnover ratio; which is arrived at by having the sales divided by the total assets.c. The utilization of debt financing is measured using the financial leverage ratios. The debtratio is equal to the total debt ratio, and is normally the summation of long-term bonds andnotes payable, to t ...
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