1. What are the four categories of financial ratios? Choose one category (excluding liquidity ratios) and list and describe the various ratios in that category. What do the calculated numbers mean for these ratios?
2. What is the Du Pont system, and why is it better than the traditional ROE model?© BrainMass Inc. brainmass.com October 24, 2018, 9:13 pm ad1c9bdddf
1) What are the four categories of financial ratios? Choose one category (excluding liquidity ratios) and list and describe the various ratios in that category. What do the calculated numbers mean for these ratios?
The four categories of financial ratios are:
1. Liquidity ratios: Can we make required payments as they fall due?
2. Asset management ratios (Activity ratios): Do we have the right amount of assets for the level of sales?
3. Debt management ratios: Do we have the right mix of debt and equity?
4. Profitability ratios: Do sales prices exceed unit costs, and are sales high enough as reflected in PM (Profit Margin), ROE (Return on Equity) and ROA (ROA)?
Profitability is the ability of a business to earn profit over a period of time. A company should earn profits to survive and grow over a long period of time. Profitability is a result of a larger number of policies and decisions. The profitability ratios show the combined effects of liquidity, asset management (activity) and debt management (gearing) on operating ...
The solution discusses Financial ratios and Du Pont system.
Advanced Financial Planning Discussion Question
I have to answer these questions below in 350 words. I have been reading the chapter and don't fully understand these questions:
Discuss the four types of ratios used in balance sheet analysis and the importance of each?
Discuss different ways a financial manager can determine his/her future financing needs. Include ways of determining the need for external financing.
"The Du Pont System links profitability and efficiency measures in useful ways". Discuss the meaning of this statement.View Full Posting Details