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Management Core
MGCR 211
Ralph Cecere

Working Capital A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as: Working Capital = Current Assets- Current Liabilities Anything below 1 indicates negative W/C (working capital). While anything over 2 means that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is sufficient. If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. Quick Ratio Measures short term liquidity, using very liquid assets (Cash, A/R, and marketable securities) Quick Ratio may reveal there is an inventory problem. Return On Assets (ROA) If the interest expense/interest is not given, you can just use: Net Earnings / Average total Assets ROA indicates the return from using assets in the business Return On Equity (ROE) Indicates the return from using funds from shareholders in the business. Gross Profit Ratio The higher, the better because it indicates COGS expense were controlled or reduced. Goodwill The excess paid on investing in shares of another company Debt/Equity Good for the ratio to be lower than 50%. Ex. If the Debt/Equity ratio was 10%, this means that for every $100 of equity used to acquire assets, $10 of debt are used to acquire assets. However, if the ratio is too low, it indicates that the company is not taking advantage of borrowing ability, which makes the company underleveraged. Financial Expense can also mean Interest (if the interest is not specifically given) Times Interest Earned It measures the company’s ability to pay interest from operating income before interest and taxes. Same Meaning IFRS GAAP Balance Sheet Statement of Financial Position Income Statement Statement of Earnings Income Tax Expense Provision of Taxes Interest Expense
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