B A 323 Chapter Notes - Chapter 4: Debt Management Plan, Quick Ratio, Current Liability
Document Summary
Liquidity ratio - give an idea of the firm"s ability to pay off debts that are maturing within a year. Satisfactory liquidty ratios are necessary if the firm is to continue operating. Asset management ratios - give an idea of how efficiently the firm is using its assets. Good asset management ratios are necessary for the firm. Debt management ratios - give an idea of how the firm has financed its assets as well as the firm"s ability to repay its long-term debt. Debt management ratios indicate how risky the firm is and how much of its operating income must be paid to bondholders rather than stockholders. Profitability ratios - give an idea of how profitably the firm is operating and utilizing its assets. Profitability ratios combine the asset and debt management categories and show their effects on roe. Market value ratios - give an idea of what investors think about the firm and its future prospects.
