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Department
Business
Course
BU121
Professor
Laura Allan
Semester
Winter

Description
Stability, profitability, and marketability ratios  Marketability: o Earnings per Share (EPS)= earnings available for common stockholders/# shares of common stock = net income – preferred stock dividends/ # shares of common stock o Calculate fully diluted if P/S convertible  Profitability: o Gross Profit Margin (GPM) = gross profit/ sales o Net Profit Margin (NPM) = net profits/ sales, check components of income statement o ROI = net income/ shareholder’s equity (net worth), most important profitability ratio for investor  Stability: o Measures a company’s ability to meet its long-term obligations by measuring the relationship between components of a firm’s capital structure. This is long term viability. o Shows results of financing decisions. Capital structure = long term liabilities + owners’ equity. Finance through equity or debt. o Debt to Equity OR Debt to Net Worth = total debt / shareholders’ equity (net worth) = current liabilities + long-term liabilities/common stock + pref. stock + retained earnings. The ‘rule of thumb’ fo
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